H  F 


r-NRLF 


THE  GOLDEN  GATE 


Report 


to  the 


United  States  Tariff  Commission 


by  the 


Committee  on  Free  Port 


appointed  by  the 


San  Francisco  Chamber  of  Commerce 


1918 


SAN    FRANCISCO    CHAMBER   OF   COMMERCE  % 

COMMITTEE   ON    FREE   PORT  U^ 

1OO4  MERCHANTS  EXCHANGE  BUILDING  ^    ^, 

SAN  FRANCISCO 


February  28,  1918 

Honorable  William  Kent, 

United  States  Tariff  Commission, 

Washington,  D.  C. 

Dear  Sir: 

The  committee  appointed  by  the  San 
Francisco  Chamber  of  Commerce  to  take  up  the 
question  of  the  advisability  of  recommending 
to  Congress  the  establishment  of  Free  Ports, 
or  Zones,  has  completed  its  labors  and 
respectfully  encloses  a  complete  copy  of  its 
findings  and  recommendations  which  it  is 
trusted  may  be  found  of  value. 

Thanking  you  for  the  opportunity 
thus  given, 

Yours  respectfully, 

GEO.  A.  NEWHALL, 
R  Chairman 


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FOREWORD 


A  New  The  question  of  establishing  "FREE  PORTS"  in  the 
Policy  United  States  as  a  new  national  policy  has  been  raised 
in  Congress,  and  to  Hon.  William  Kent,  a  member  of 
the  United  States  Tariff  Commission,  has  been  assigned  the 
duty  of  collecting  and  preparing  data  on  the  subject  for  trans- 
mission to  Congress. 

The  consideration  of  tine  matter  before  the  San  Francisco 
Chamber  of  Commerce  was  inaugurated  by  Mr.  Kent  at  a 
meeting  held  October  23,  1917,  which  was  attended  by  repre- 
sentatives of  the  mercantile  and  shipping  interests  around  San 
Francisco  Bay,  and  this  report  is  the  result  of  the  investiga- 
tion that  ensued. 

Meaning  of     A  brief  explanation  of  the  nature  and  purposes  of 
Free  Port       what  is  meant  by  a  "FREE   PORT"  may  be   of 
service  in  comprehending  the  following  argument 
in  favor  of  its  institution. 

Common.      Free    ports,    or   free    zones    in    portions    of   harbors, 
Elsewhere     have  long  been  known  in  Europe  and  Asia,  but  the 
subject  is  much  misconceived  in  the  United  States 
because  of  the  ambiguity  of  the  word  "free". 

Freedom  from  It  does  not  mean  freedom  from  harbor  or 
Customs  Control  port  charges,  such  as  tolls  or  wharfage  on 
cargoes,  dockage  on  ships,  pilotage,  towage, 
etc.  Nor  does  it  involve  any  change  in  tariff  policy.  Briefly, 
it  means  freedom  from  customs  control. 

Physical  A    reasonably    large    part    of    a    port    is    segre- 

Arrangements  gated  for  the  conduct  primarily  of  foreign 
commerce,  and  in  order  to  guard  against 
intrusion  by  unauthorized  persons  and  for  the  better  enforce- 
ment of  laws  and  regulations  it  is  enclosed  by  substantial  bar- 
riers on  both  land  and  water  sides.  This  constitutes  the  "free 
zone",  and  from  it  all  customs-house  activities,  except  precau- 
tions against  smuggling,  are  excluded. 

How  It     Here  the  imported  merchandise   is   landed,  and   when 

Works       the  imports  pass  through  the  land  or  water  gates  of 

the  enclosure  into  the  country  elsewhere,  then  at  that 

time   and   at   the   gate,   theoretically,   the   duties   incident   to   the 


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collection  of  the  tariff  dues  begin  and  all  the  complicated  rules 
and  regulations  of  the  customs  service  first  go  into  operation. 
If  the  imports  are  not  taken  for  domestic  consumption,  they 
may  be  re-exported,  whether  in  the  original  packages  or  other- 
wise, without  payment  of  tariff  dues  or  interference  by  customs 
officials.  The  same  is  true  of  foreign  raw  materials  landed  and 
worked  up  into  manufactures  inside  the  free  port,  and  designed 
for  re-export. 

Handling  and  While    the    imports    are    in   the   free    zone 

Freighting  Without     they  may  be  stored  in  non-bonded  ware- 
Molestation  houses  or  handled  ad  libitum  by  the  parties 
interested  with  absolute  freedom,  and  may 

be  prepared  for  shipment  either  into  the  country  or  for  trans- 
shipment or  re-export  to  foreign  countries  and  started  on  their 
way,  without  the  onerous  impediments  now  caused  by  customs- 
house  supervision,  red-tape  and  penalties. 

It  is  merely  a  new  system  of  customs  collection  and  super- 
vision. The  customs-house,  so  to  speak,  is  removed  from  the 
ship  and  wharf,  where  it  now  holds  sway,  and  is  set  up  at  the 
gates  of  the  free  zone. 

Tariff  Policy  The  proposed  change  does  not  in  any  way  affect 
Not  Affected  the  nature  or  size  of  the  tariff  dues,  simply  the 
method  and  manner  of  their  collection  and  the 
places  where  the  customs  activities  shall  be  exercised.  The 
aim  is  to  put  them  outside  the  free  zone  entirely. 

Ample  in  Of  course,  the  enclosed  area  of  water  and  land  in- 
Size  and  side  the  free  zone  must  be  sufficiently  large  to 
Facilities  accommodate  the  foreign  commerce  of  the  port,  and 
it  should  be  provided  with  all  the  necessary  wharves, 
non-bonded  warehouses,  railways,  spur-tracks,  and  devices 
required  for  the  rapid  and  economical  handling  of  cargoes. 

This  report  was  prepared  on  behalf  of  the  San  Francisco  Bay 
conference  alluded  to  by  Mr.  J.  J.  Dwyer,  former  President  of 
the  Board  of  State  Harbor  Commissioners  in  charge  of  the 
Port  of  San  Francisco. 


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FREE  PORTS 

AS  A 

NATIONAL  POLICY 


We  have  reached  the  conclusion  without  a  dissenting 
voice  that  a  national  policy  of  "Free  Ports"  should  be 
inaugurated  by  the  Federal  Government,  for  the  reason 

that  such  a  policy  would  directly  tend 
Free  ports  in  a  marked  degree,  well  worth  the  cost 
advocated  of  the  necessary  changes  in  the  present 

system,  to  increase  profitable  foreign  trade 
and  build  up  a  merchant  marine,  whether  the  latter 
is  to  remain  privately  owned  and  operated,  or  be 
more  or  less  governmentally  owned  or  controlled  or 
operated. 

In  giving  our  reasons  in  detail,  we  shall  try  to  avoid 
anything  like  an  essay  on  the  theory  of  the  subject, 
or  an  attempt  at  a  summary  of  the  practice  and  expe- 
rience of  foreign  free  ports,  which  would  be  only  a 
useless  repetition  of  matters  better  stated  in  other 

compilations  and  reports.  Of  such  reports 
No  essay  of  American  origin,  we  refer  particularly 
attempted  to  those  emanating  from  the  Merchants 

Association  of  New  York,  which  we  have 
found  most  illuminating,  and  have  studied,  with  hope, 
with  profit.  We  may  say,  briefly,  that  the  New  York 
conclusions  seem  to  us  well-founded  and  their  reasons 
clearly  stated  and  very  persuasive  in  favor  of  the  idea. 
We  have  no  hesitation  in  saying  that  we  share  their 
convictions  most  decidedly. 

Page       Seven 


We  had  attempted  a  treatment  of  the  subject  in  the 
abstract,  but  on  perusing  the  argument  in  favor  of 
the  installation  of  a  Free  Port  on  New  York  Harbor, 

which  was  submitted  to  the  United  States 
New  York  Tariff  Commission  by  the  Industrial 
reports  Bureau  of  the  Merchants  Association  of 

New  York,  it  became  apparent  that  much 
of  our  matter  could  be  eliminated  as  mere  repetition 
of  what  is  there  contained  in  more  cogent  form,  and 
therefore  what  we  have  to  say  will  be  largely  supple- 
mentary to  that  argument  or  illustrations  drawn  from 
our  local  experience. 

THE  PORTS  OF  NEW  YORK  AND  SAN  FRANCISCO 
ANALOGOUS  IN  FOREIGN  OUTLOOK 

The  geographical  situation  of  San  Francisco  Bay, 
with  respect  to  the  Pacific  Ocean  trade  of  the  United 
States,  is  justly  comparable  with  that  of  New  York, 
with  respect  to  the  Atlantic  trade,  even  if  the  New 
York  trade  partakes  in  larger  measure  of  the  char- 
acter of  world  trade.  This  analogy  holds  good  both 
as  regards  back  country  in  America  and  as  regards 
foreign  countries  facing  us.  Russia,  through  Siberia, 
Japan,  China,  Java,  Australia,  New  Zealand  and  even 
British  India  now  have  trade 
The  ocean  unites,  relations  of  great  volume  and  value 
if  does  not  divide  with  and  through  San  Francisco. 
This  is  true  also  of  the  eastern 
shores  of  the  Pacific,  South  America,  Central 
America,  Mexico  and  Canada.  Statistics  to  justify 
this  statement  are  readily  available  and  need  not  be 
cited  here.  The  names  of  these  countries  alone  call1 
to  mind  enormous  populations,  hungry  for  our  manu- 

P  a  g  e       Eight 


factures,  cotton,  steel,  metals  and  food  products  and 
other  raw  materials,  and  themselves  teeming  with 
food  products  and  raw  materials  which  we  need  and  \ 
must  have,  not  only  for  our  domestic  use  but  also 
indispensable  if  we  propose  to  compete  successfully 
with  Europe  in  supplying  the  world  trade.  Expatia- 
tion  on  this  idea  would  be  easy,  but  its  applications 
are  obvious.  The  reasons  that  are  valid  in  New  York 
are  valid  here. 

So,  like  New  York,  we  approach  this  subject  in 
no  small  or  local  spirit.  We  have  tried  to  measure 
it  on  the  national  scale.  Is  the  "Free'  Port"  policy 
a  wise  departure  for  the  nation?  Will 
The  question  it  pay?  Will  the  results  justify  the 
national,  cost?  Are  its  manifest  advantages  off- 

set by  any  demonstrable  disadvantages, 
that  either  outweigh  the  advantages  or 
come  so  near  balancing  the  scale  that  the  change  is 
not  worth  while?  Can  the  present  customs  system,  the 
growth  of  a  century  of  experience,  be  remodeled  in  its 
operative  methods  and  adapted  to  the  free  port  idea 
without  disadvantage  to  the  customs  revenues  either 
in  cost  of  collection  or  security  against  smuggling? 

We  have  kept  these  fundamental  questions  in  mind 
in  reaching  our  conclusions. 

We  assume  that  foreign  trade  is  a 

Foreign  trade  and  d  thi         eyen   an  indispensable 

merchant  marine.       \  •          <•  j 

national  blessings     thlng>  for  OUr  COuntry'  and  We  as- 
sume     that     a     merchant     marine 

owned  and  operated  by  our  own  people,  under  either 
public  or  private  auspices,  is  highly  advantageous, 
and,  in  fact,  that  recent  experience  due  to  the  world 
war  has  demonstrated  that  a  merchant  marine  is  al- 

P  a  g  e       Nine 


most  vital  to  the  preservation  of  our  political  and  in- 
dustrial system,  let  alone  a  profitable  enterprise  in 
itself. 

For  the  present  purpose  such  assumptions  will  he 
made.  We  believe  in  both  of  them  most  religiously. 
Arguments  as  to  them  belong  elsewhere  and  are  readily 
available.  But  it  is  proper  to  say  that 
San  Francisco  it  is  our  profound  faith  in  both  as- 
a  commercial  sumptions  that  makes  us  vividly  re- 
commumty  alize  the  tremendous  importance  of 

the  free  port  idea.  San  Francisco  is 
a  commercial  community.  For  the  seventy  years  of 
its  existence  it  has  thrived  on  foreign  commerce.  Its 
future  is  bound  up  in  its  expansion  and  extension  in 
all  directions  and  to  all  countries.  Our  horizon  is  the 
world.  We  want  our  markets  eventually  to  be  every- 
where, but  without  any  boasting  we  have 
Our  horizon  the  vision  to  see  that  the  present  begin- 
is  the  world  nings  in  the  Orient  and  on  this  side  of 
the  Pacific  will  in  the  immediate  future 
grow  by  leaps  and  bounds,  provided  we  are  not  handi- 
capped in  the  race  by  governmental  regulations  that 
unnecessarily  impede  foreign  trade  and  which  can  be 
removed  by  wise  changes  and  no  corresponding  loss. 
Natural  ^ur  natura^  advantages  of  geographical 

advantages  situation,  the  possession  of  a  harbor  al- 
for  shipping  most  unequaled  in  size  and  conveniences, 
with  deep  water,  negligible  tides,  no 
storm  damage,  a  mild,  even  climate  the  year  round, 
these  give  us  the  necessary  basis  for  foreign  trade  in  a 
measure  rarely  equaled. 


Page        Ten 


HELPS  AND  HINDRANCES 

What  remains  is  for  us  to  see  that  the  legitimate 
artificial  helps  are  speeded  up  and  that  the  artificial 
hindrances  are  reduced  to  a  minimum. 

Briefly,  the  artificial  helps  directly  under  our  con- 
trol come  under  the  domain  of  transportation,  ship, 
rail  and  otherwise,  switching  and  other  conveniences; 
and  under  the  head  of  general  harbor 
Artificial  helps  facilities,  including  quicker  and 
to  commerce  cheaper  warehousing  and  freight- 
handling  in  every  department.  These 
cannot  be  discussed  here,  but  must  be  mentioned,  be- 
cause they  must  all  be  connected  up  with  the  free  port 
idea  most  intimately  and  definitely  before  the  latter 
can  be  even  understood  and  especially  before  the  latter 
can  be  seen  to  be  an  appreciable  step  in  advance.  It 
is  because  and  principally  because  the  combination  of 
artificial  helps  alluded  to,  in  themselves  capable  of 
indefinite  improvement,  will  work  better  and  flourish 
and  grow  better  under  free  port  arrangements  than 
under  the  present  system,  that  the  free  port  idea  is  at 
all  to  be  considered. 

r  The  difficulty  about  the  argument  for! 

Free  ports  *  6 

theoretically      t"e  *ree  Port  irom  the  theoretical  side 
is  that  it  is  so  obviously  sound  as  to  be 
axiomatic,  and  discussion  or  expatiation  tends  rather 
to  obscurity  than  clarification. 

Working  with-      ^s  a  matter  of  course>  freedom  from 
out  shackles  customs    control,    and    the   incidental 

delays,  costs,  vexations  and  losses, 
must  inevitably  benefit  foreign  trade.  To  argue  other- 
wise is  to  say  that  a  man  can  work  faster  or  better 
with  a  couple  of  fingers  or  a  hand  tied  up  or  missing. 

Page      Eleven 


It  would  be  foolish  to  say  that  the  freedom  of  the 
port  in  and  of  itself  alone  makes  a  port  great  in  its 
volume  of  foreign  trade.  We  have  great  ports  that  are 

not  free  ports.  It  would  be  ridicul- 
Only  one  factor  ous  to  contend  that  the  trade  of  Lon- 
in  port's  don  or  Hamburg,  for  example,  has 

prosperity  been  due  solely  or  even  mostly  to  the 

kind  of  "freedom"  involved  in  the 
free  port  idea.  Many  factors  and  causes,  some 
natural,  as  above  stated,  some  artificial,  of  the  kind 
alluded  to,  others  that  belong  under  the  head  of 
financial  organization,  labor  conditions,  government 
aid,  etc.,  etc.,  in  varying  degrees  in  different  great 
ports,  go  to  make  up  the  sum,  but  what  is  in  point 
here  is  to  note  and  make  plain  that  the  freedom  of  a  | 
port  from  unnecessary  interference  by  government 
officials  and  rules  and  restrictions,  whether  customs  or 
otherwise,  must  necessarily  and  to  an  appreciable  de- 
gree be  a  real  factor  to  be  reckoned  with.  It  may  not 
be  so  easy  to  see  this  in  the  case  of  London  and  Ham- 
burg, where  the  other  factors  are  so  overshadowingly 
important,  but  it  is  very  easy  to  see  it  in  the  examples 
of  Hongkong  and  Singapore  on  the  Pacific,  and  it 
has  been  made  quite  apparent  in  the  recent  brief  trial 
in  Copenhagen  in  Europe.  We  must  content  our- 
selves to  mere  references  on  these  aspects  of  the 
subject. 

If  the  freedom  of  a  port  is  a  measur- 
But  that  factor    aWe  factQr  ifl  itg  prosperity    it  follows 

counts  •      i  i      •  • 

that  conceivably  it  may  in  many  cases 

be  the  deciding  factor  as  between  it  and  its  foreign 
rivals. 


Page        Twelve 


LOOK  ACROSS  THE  PACIFIC 

A    general    survey    of  Pacific 

Hongkong  and  ~  •  1 1  • 

c.  .  Ocean    commerce   will  in    our 

Singapore,  great 

international  markets     judgment     warrant     the     con- 
clusion that  a  national  free  port 

policy  applied  to  San  Francisco  Bay  would  mean  in 
a  short  time  the  establishment  of  an  international 
market  on  San  Francisco  Bay  comparable  in  import- 
ance with  Hongkong  and  Singapore. 

When  we  consider  how  much  of  the  trade  of  both 
these  great  world  ports  is  directly  and  plainly  trace- 
able, in  the  first  place,  to  wise  governmental  helps  of 

an  affirmative  character,  and,  secondly,  to 
Largely  the  absence  of  customs  control  or  inter- 
artificial  ference,  that  is  to  say,  to  the  fact  that  they 

are  "free  ports,"  we  arrive  at  some  compre- 
hension of  the  degree  in  which  it  is  true  to  say  thatj 
the  greatness  of  both  ports  has  been  largely  artificially 
established  by  England. 

Both  these  ports  are,  on  the  one  hand,  practically 
"branch  stores,"  as  they  have  been  aptly  called,  for 
the  sale  in  the  Orient  of  goods  from  all  nations,  and, 

on  the  other  hand,  they  are  the  assembly 
World  places  of  the  innumerable  cargoes,  large  and 
stores  small,  that  come  not  only  from  their  respec-  ( 

tive  immediate  neighborhoods  but  from  all 
over  the  Orient,  and  whose  ultimate  destination  is 
Europe  or  the  Americas.  In  this  way  are  collected, 
and  then  sorted,  graded  and  packed,  the  spices,  cocoa, 
teas,  vegetable  oils,  tin  and  other  ores,  rubber,  copra 
and  other  raw  materials,  in  immense  volumes,  that 
might  indeed  have  been  gathered  up  elsewhere,  but 
are  gathered  up  and  re-exported  by  Singapore  and 

Page       Thirteen 


Hongkong  largely  because  of  their  superior  port  ar- 
rangements based  on  the  free  port  policy.  These  arti- 
ficial arrangements  have  been  main,  if  not  controlling, 
factors  in  making  them,  the  distribution  centers  and 
market-places  both  for  imports  to  and  the  exports  from 
the  Orient. 

THE  PACIFIC— OCEAN  OF  OPPORTUNITY 

San  Francisco  ought  to  ful- 

San  Francisco,  a  half-  fin  similar  functions  as  be- 
way  station  and  market-  \  r\  •  j  o  •  1 

place  between  Orient  tween  the  Onent  and  SPanish 
and  Spanish-America  America,  and  we  believe  the 

free  port  system  would  help 

appreciably  in  giving  a  strong  impetus  to  the  creation 
and  indefinite  expansion  of  that  branch  of  foreign 
commerce  which  embraces  the  re-export  trade. 

The  trans-  ^e  argument  must  be  brought  down 

shipment  trade      pointedly  to   that  particular  depart- 
ment of  foreign  commerce  which  in- 
volves trans-shipment  or  re-export. 

IS  THE  TRANS-SHIPMENT  TRADE  WORTH 
SEEKING? 

We  will  fail  to  understand  the  question  in  its  nature 
or  magnitude  unless  we  start  with  a  fair  appreciation 
not  only  of  the  utility  of  foreign  trade  as  a  whole,  but 

also  a  sufficient  estimate  of  the  large 
Its  importance  department  of  foreign  trade  which 
not  appreciated  consists  simply  of  the  processes  of 

handling  over  and  over  again  the 
same  things,  in  their  passage  from  the  fields  of  their 
production  to  the  factories  where  they  are  turned  into 
goods  or  to  the  shops  where  they  are  delivered  to  cus- 
tomers, and,  conversely,  the  repeated  handling  of  the 

Page      F    ourteen 


finished  products  on  their  way  out  from  the  factory 
to  their  markets  the  world  over.  Of 
Its  vast  and  in-  course  the  profits  are  in  proportion  to 
creasing  volume  the  volume  handled.  The  profits  of 
this  merchandising  commerce  go  to 
the  ports  best  equipped  by  natural  and  artificial  ad- 
vantages and  with  highly  developed  financial  and 
business  organizations.  It  is  a  commercial  truism  that 
trade  will,  within  limits,  follow  the  lines  of  least  re- 
sistance. And,  of  course,  where  customs  regulations 
are  absent,  to  that  extent  indubitably  will  trade  flow 
preferably  through  free  channels. 

Shall  America  The  trans-shipment  business  of  the  j 
share  this  trade?  world  runs  annually  into  billions  of 
dollars.  Good  authority  makes  the 
figure  over  four  billions.  Up  to  the  world  war  much 
the  greater  part  was  done  in  free  ports.  It  is  well 
worth  the  effort  to  get  our  share. 

Our  share     Comparatively,  but  a  very  small  propor- 
small  ti°n  °f  America's  trade  with  foreign  na- 

tions has  come  under  this  head,  but  its 
growing  importance  has  been  made  more  and  more 
manifest  by  the  developments  and  changes  due  to  the 
present  war. 

Its  centers    That  business   in   the  Occident  has   here- 
tofore centered  in  the  neighborhood  of  the 
British  Channel  and  the  North  Sea,  and  in  the  Orient 
at  Singapore  and  Hongkong. 

If  American  ports  want  to  compete  ! 
Clear  the  path  ,   „  •     u      TT  j 

of  unnecessary      successfully     with     European     and 
obstacles  Asiatic  ports  in  this  rich  sphere  of 

trade,  we  will  be  handicapped  in  the 

Page     Fifteen 


race  just  in  so  far  as  that  trade  is  artificially  hindered 
by  the  manner  and  method  of  the  enforcement  of  the 
customs  laws.  Nothing  is  here  said  or  intended  for  or 
against  either  a  high  or  low  tariff  or  for  or  against  a 
protective  or  revenue  system  of  tariff  taxes.  We  mean 
to  confine  ourselves  solely  to  the  manner  and  method 
of  enforcing  the  collection  of  the  tariff  taxes,  whatever 

be  the  particular  policy  in  force,  as  to 
Tariff  policy  the  kind  or  amount  of  the  customs  dues. 
not  affected  We  are  familiar  with  and  know  from 

experience  the  costs,  delays,  vexations 
and  losses  due  to  customs  red-tape  and  supervision. 
They  are,  we  believe,  a  very  serious  impediment  to  the 
re-export  trade  and  foreign  commerce,  generally.  If 
removed,  the  gain  will  be  enormous.  If  they  can  be 
removed  by  the  simple  process  of  putting  the  customs- 
house  and  its  red-tape  wholly  outside  the  "free  zone" 

or  "free  port",  without  any  loss  to 

Costs  of  instal-  the  government  in  revenue,  with- 

lation  of  free  ports  out  any  increase  in  the  cost  of  col- 
borne  by  the  lecting  the  taxes  and  without  any 

localities  favored  greater  risk  of  smuggling,  surely 

nothing  remains  of  the  argument 
except  the  single  question  as  to  whether  in  the  older 
ports  the  change  can  be  effected  without  too  great  a 
cost  for  the  physical  constructions  or  re-arrangements 
necessary  to  install  the  free  port  system.  In  the  newer 
ports,  where  there  is  much  virgin  territory  to  work  on, 
of  course  this  part  of  the  problem  is  of  easier  solution. 

In  the  latter  aspect  it  is  proper  to  point  out  that  on 
San  Francisco  Bay  the  present  situation  lends  itself 
admirably  to  the  proposed  change.  It  would  be  idle 
to  go  too  deeply  into  that  question  at  this  time.  If 

Page      Sixteen 


the  policy  be  a  wise  one  nation- 
San  Francisco  Bay  ally,  the  natural  advantages  above 
an  ideal  site  for  adverted  to,  an  inspection  of  the 

free  port  gan  Francisco  harbor  on  both 

sides  of  the  Bay  of  San  Francisco, 
a  consideration  of  the  commercial  propensities  and 
aptitude  of  our  people,  the  evidence  furnished  by 
immense  recent  outlays  for  harbor  improvements  and 
the  superior  facilities  now  available,  all  combined 
demonstrate  the  justness  of  the  conclusion  that  San 
Francisco  Bay  is  an  ideal  site  for  a  "free  port". 

In  the  arguments  and  data  appended  to  this  report, 
contributed  by  sub-committees,  and  which  are  incor- 
porated herein  in  support  of  our  conclusions,  the  argu- 
ment from  economy  frequently  appears.  It  may  be 
reinforced  in  another  way.  The  multiplication  table, 
it  must  be  remembered,  will  be  industriously  at  work. 
It  figures  enormously  in  the  balance  of  advantages. 
Even  the  smallest  economy  in  handling  freight  due  to 
the  superior  arrangements  practicable  only  in  a  free 
port  with  well  co-ordinated  transportation  systems  and 
freight-handling  devices,  multiplied  by  the  number  of 
times  the  operation  takes  place  in  the  course  of  a  year, 
soon  runs  into  fabulous  figures.  People  are  astonished 

to  be  informed  that  it  often  costs  as 
The  argument  much  to  transfer  a  box  of  apples  from 
from  economy  one  part  of  a  city  to  another  as  to  ship 

it  across  the  continent.  And  similar 
amazement  will  follow  the  institution  of  a  free  port, 
where,  under  freedom  from  customs  interference, 
cars,  ships,  warehouses  and  all  the  other  means  and 
methods  of  collecting,  transporting,  sorting,  cleaning, 
packing,  grading  and  other  manipulation  of  goods 

Page      Seventeen 


and  materials,  are  brought  into  closest  juxtaposition, 
and  consequently  where  all  these  intricate  and  complex 
things  may  be  done  with   the  minimum  of   friction, 
delay,  cost,  vexation  and  loss.    A  saving  in  the  smallest 
point  of  the  entire  operation  multiplied  by  the  endless 
repetitions  of  the  same  thing  year  in  and  year  out,— 
what  will  the  figures  amount  to?     Our  new  habits  of 
thrift  may  give  some  faint  idea  of  the  total. 
The  argument     Opponents  of  the  free  port  policy  will 
contra  point  out   that  our  present  enormous 

foreign  trade  has  grown  up  in  the 
absence  of  the  free  port  policy,  and  that  it  will  un- 
doubtedly develop  indefinitely  under  the  present 
system  of  customs  collection,  with  such  modification 
as  may  be  suggested  by  experience  as  we  go  along, 
and  that  such  a  radical  departure  as  that  involved  in 
the  establishment  of  free  ports  is  for  that  reason 
unnecessary  and,  because  of  the  cost  and  confusion 
of  the  proposed  changes,  unwise. 

It  is  plain  that  the  argument  for  the  new  policy 
will    fail    unless    we    demonstrate    that    the    gains    in 
efficiency   and   economy  will   probably  outweigh   the 
costs  and  other  disadvantages  of  the  change. 
GIVE  FOREIGN  COMMERCE  WINGS,  NOT  SHACKLES 

Anything  like  an  exact  calculation  of  such  obscure 
and  complex  factors  is  extremely  difficult,  but  our  best 
judgment,  based  on  the  experience  of  foreign  ports, 

a  working  acquaintance  with  our  own 
Advantages  present  customs  and  harbor  systems,  and 
summarized  a  study  of  the  question  in  the  abstract, 

has  convinced  us  that  under  a  free  port 
system  foreign  trade  will  be  expanded  and  its  profits 
enhanced  in  the  following  ways: 

Page        Eighteen 


Re-exportation      FirSt:       Xt    is     self-evident    th*<    re- 
stimulated  exportation,   even   in   original   pack- 

ages, will  be  facilitated,  speeded  up 
and  cheapened,  if  the  goods  and  materials  do  not  have 
to  pass  through  the  customs-house  at  all. 

Second:  Storage  in  non-bonded  warehouses  will 
be  facilitated,  accelerated  and  cheapened.  The  ideal 
arrangement  is  to  have  them  right  alongside  the  land- 
ing places.  Right  alongside  the  ware- 
Storage  houses  should  be  the  railroad  switch  yards, 
improved  connected  up  with  the  many  trans-contin- 
ental and  state  systems  that  may  be  brought 
to  the  wharf  directly  or  by  a  connecting  belt  railway 
switching  system.  The  bonded  warehouse  would  not 
be  eliminated,  but  would  be  provided  outside  and  not 
inside  the  free  zone.  Its  present  advantages  could 
thus  be  retained. 

Third:     Inside  the  free  port  re-packing,  blending, 

mixing,    cleaning    and    other    legitimate    commercial 

manipulation  of  merchandise  des- 

Commercial  treat-    tined    for    re-export    is    facilitated. 

ment  of  imports        These    things    can    go    on    in    the 

made  possible  warehouses  of  the  free  port  or  in 

open  places  provided.     In  bonded 

warehouses  these  processes  are  "cribbed,  cabined  and 

confined"  in  a  way  that  not  only  seriously  impedes  but 

often  in  instances  totally  prevents  the  business. 

Fourth:     Foreign  merchants  can  maintain  sample 

or    consignment    stocks    therein    without    duty    unless 

finally  admitted  into  the  country.     The  customs-house 

only  protects   itself   from   smuggling. 

A  real  trading     That  would  be  a  great  advantage.     It 

market  has  been  proposed,  since  the  Panama 

Canal    opened,    to    have    a    perpetual 

Page      Nineteen 


exposition  of  goods  on  the  Isthmus,  where  foreign  and 
American  merchants  could  maintain  sample  and  con- 
signment stocks.  That  would  be  advantageous  to  both 
sides.  And  why  not  in  free  ports  elsewhere? 

Fifth:     Quickened   and  cheapened   distribution   of 
goods  into  the  interior  or  to  other  nations  on  our  other 
frontiers.     This  would  tend  to  build 
Improved  distri-    up    distribution    centers.      The    geo- 
bution  facilities     graphical     location     and     the     topo- 
graphical features  of  San  Francisco 
Bay  make  it  ideal  for  a  vast  distributing  center  and 
international  market-place. 

Cx  i-  Sixth:  For  steamships,  emphatically 
Steamships  .  u  ,  • 

unchained        time  is  money.       If  we  could  eliminate 

or  materially  lessen  the  delays  due  to  the 
customs-house,  so  much  the  better  for  the  ships  already 
in  the  trade;  so  much  greater  the  inducement  for 
other  ships  to  come. 

r  „  Seventh :     The  free  port  tends  strongly 

Full  cargoes 

both  ways  to  ma^e  ships  sure  of  cargoes  both  going 
/  and  coming,  by  making  practicable  the 
distribution  of  incoming  cargoes  to,  and  the  assembly 
of  out-going  cargoes  from,  tributary  territory,  thereby 
attracting  ships  which  would  otherwise  go  elsewhere. 

General  freight-  EiShth :  The  required  facilities 
ing  unmolested  would  be  furnished  for  all  freight- 
ing operations  between  ocean  and 
rail  carriers  and  warehouses  and  to  and  from  all  of 
them,  without  customs  impediments,  until  the  freight 
was  about  to  enter  customs  territory. 

Ninth:     It  results  in  saving,  due  to  such  freedom, 
in  time,  labor,  worries  and  losses  in  transfer  of  freight. 

Page      Twenty 


Handling,    drayage    and    other   ex- 

Savings  in  many     Penses   would   be    reduced.      There 
directions  would  still  be  customs-house  brokers, 

but  cargoes  would  not  have  to  deal 
with  them  or  through  them  while  the  goods  were  in 
the  free  port.  There  is  no  doubt  that  their  business 
would  be  simplified  by  an  arrangement  where  the 
customs-house  is  at  the  gates  of  the  free  port. 
The  chan  e  Tenth :  From  the  pecuniary  standpoint, 
would  pay  tne  one  from  which  we  ultimately  look 

at  this  problem,  the  returns  must  un- 
doubtedly be  correspondingly  enhanced  both  to  the 
carriers,  ship  and  rail,  and  to  the  merchants,  importer 
and  exporter. 

Eleventh:  The  greater  the  natural  advantages  of 
the  port  from  its  geographical  and  topographical 
features  and  from  its  market  and  trade  connections,  and 

the  better  its  harbor  improvements  and 
Works  with  facilities,  the  more  surely  and  immedi- 
nature  ately  and  largely  would  the  benefits 

flowing  from  the  institution  of  the  free- 
dom-f  rom-customs  control  system  be  reaped.  Freedom 
alone  will  not  make  a  port  big  or  prosperous.  It  is 
simply  one  of  the  desirable  factors. 

ALL  INTERESTS  BENEFITED  BY  FREE  PORTS 

The  free  port  system  certainly  adds  to  the  pleasure 
of  foreign  business,  adds  to  its  profits  and  adds  to  its 
volume. 

The  benefits  may  be  considered  from  different 
standpoints. 

First,  from  that  of  the  owners  or  charterers 
lp      of  the  ships.     It  is   self-evident  that  the 

Page       Twenty-one 


ship's  owners  and  the  charterers  would  be  benefited 
enormously.  The  system  would  strongly  tend  to  build 
up  a  self-sustaining  national  merchant  marine. 

Second,  from  the  standpoint  of  the 
The  merchant  ,  .  , 

merchants,   importer  or  exporter,   the 

advantages  are  equally  plain. 

Third,  from  the  standpoint  of  harbor  administra- 
tion. If  the  customs-house  toll  gates  were  at  the 
entrance  of  the  free  port,  harbor  arrangements  would 
inevitably  be  in  far  better  shape.  The  customs-house 

man  and  his  necessary  interference 
The  port  on  the  wharves  would  be  eliminated. 

administration  In  our  experience  in  San  Francisco 

we  found  that  many  times  consignees 
are  unfair  in  a  practice  of  making  the  customs-house 
an  excuse  for  keeping  cargoes  on  the  wharf  longer 
than  they  should  be  kept;  and  freight  congestion  is 
alleged  to  be  due  to  inadequate  wharf  arrangements, 
when,  in  fact,  it  is  frequently  a  case  of  juggling  in 
order  to  secure  free  storage  on  the  piers.  It  means 
much  to  the  port  to  have  this  congestion  reduced  to 
the  lowest  terms.  It  is  a  very  serious  and  costly  detri- 
ment to  a  port  to  have  the  wharves  piled  up  with 
goods  because  real,  and  frequently  pretended,  customs- 
house  requirements  compel  it. 

Fourth,  from  the  standpoint  of  customs-house  admin- 
istration. We  are  aware  that  this  is  one  of  the  hard 
knots  of  the  problem.  From  the  customs  standpoint 
the  free  port  arrangements  must,  of  course,  be  entirely 

consistent  with  the  sure  and  cheap 
The  customs  collection  of  the  customs  tariff;  but  the 
administration  experience  of  the  free  ports  of  other 

nations,   even   with   high   tariffs   of    a 

Page       Twenty-two 


protective  nature,  would  indicate  that  customs  ex- 
perts can  find  a  solution  of  that  feature  of  the  prob- 
lem. We  appreciate  the  fact  that  the  burden  is  on 
the  advocates  of  a  free  port  policy  to  show  that  present 
customs  arrangements  operate  on  foreign  trade  as  a 
handicap  of  really  serious  proportions,  that  they  not 
only  increase  unduly  the  operative  cost  of  the  foreign 
trade  we  now  have,  but  also  in  all  likelihood  prevent 
new  trade  coming  or  otherwise  hinder  its  growth,  or 
give  rival  ports,  without  these  hindrances,  just  that 
much  advantage  in  the  contest.  We  have  tried  to 
keep  the  practical  in  mind  and  avoid  anything  that 
savors  of  the  academic.  In  this  view  we  sought  the 
advice  of  experienced  customs-house  brokers,  because 
in  the  end  the  decision  arrived  at  by  Congress  will 
doubtless  be  based  largely  on  what  may  be  thought 
to  be  the  teachings  of  customs-house  experience.  An 
article  on  the  subject  from  this  standpoint  by  Mr.  F. 
F.  G.  Harper,  who  has  had  many  years  experience  in 
San  Francisco  as  a  customs-broker,  is  appended  and 
will  no  doubt  be  found  instructive. 

Fifth,  from  the  standpoint  of  the  manufacturer. 
We  refer,  firstly,  to  manufactures  within  the  free  port 
for  export  to  foreign  countries  of  products  wholly  or 
partly  made  from  imported  raw  materials,  which 
under  the  present  system,  would  be 
The  subject  to  duty  in  the  first  instance  and 

Manufacturer  upon  which  draw-backs  are  now  al- 
lowed when  exported.  The  draw- 
back system  is  so  little  in  vogue  in  San  Francisco  that 
our  experience  is  an  insufficient  guide  as  to  its  real 
merits.  The  consensus  of  opinion  is  that  up  to  date 
it  has  not  been  of  much  use.  It  is  generally  denomin- 

Page      Twenty  -three 


ated  by  those  who  have  sought  to  use  it  a  nuisance 
rather  than  a  genuine  stimulus  to  such  trade.  We 
must  leave  the  draw-back  question  to  the  experience 
of  larger  manufacturing  centers.  Of  course,  if  such 
manufactures  were  centered  within  the  enclosures  of 
the  free  port,  it  would  require  just  so  much  more 
land  area,  —  a  consideration  that,  generally  speaking, 
would  probably  confine  that  department  of  the  free 
port  within  comparatively  small  proportions. 

Probably  the  principal  advantage  that  the  freedom 
of  the  port  would  contribute  to  the  American  manu- 
facturing industry  as  a  whole,  not  only  in  regions 
near  the  ports  but  throughout  the  country,  would 
result  from  the  creation  in  such  ports  of  international 
market-places  for  the  assembly  of  foreign  raw  ma- 
terials needed  by  our  manufacturers.  This  feature  of 
the  subject  is  ably  set  forth  at  length  in  the  New  York 
article  alluded  to  and  we  leave  the  matter  there. 

ADDITIONAL  REPORTS 


Foreign  trade      We   also   append   an   article  prepared 
considered  by  Mr.  John  Clausen,  of  the  Crocker 

National  Bank,  on  behalf  of  our  sub- 
committee on  Foreign  Trade. 

His  committee  circulated  questionnaires,  of  which  a 
sample  is  attached,  among  those  interested  in  the 
foreign  trade.  An  admirable  answer  was  received 
from  Mr.  J.  H.  Polhemus,  of  the  Hamberger-Pol- 
hemus  Company,  a  long  established  firm  of  exporters 
and  importers,  in  San  Francisco.  We  incorporate 
this  in  our  report,  as  written,  as  an  illustration  of  what 
our  merchants  have  learned  from  actual  experience, 
touching  on  the  free  port  idea. 

Page      Twenty  -four 


We  have  accepted  Mr.  Kent's  suggestion  that  until 
Congress  has  first  declared  in  favor  of  a  free  port 
policy  by  general  legislation,  arguments  in  favor  of  a 
particular  locality  as  a  suitable  site  for  a  free  port 

will  not  be  opportune.  We  recog- 
Select ion  of  free  nize  that  they  will  be  appropriate 
port  sites  an  after  for  later  consideration,  either  by 
consideration  Congress,  if  it  directly  names  the 

sites,  or  by  the  Executive  Depart- 
ment or  other  bodies  to  which  that  duty  may  be  dele- 
gated under  general  laws.  However,  as  certain  pre- 
liminary reports  on  the  suitability  of  San  Francisco 
harbor,  on  both  sides  of  the  Bay  of  San  Francisco, 
have  been  submitted,  we  take  the  liberty  of  forward- 
ing them  for  filing,  to  be  presented  later  at  the  proper 
time. 

CONCLUSION 

In  conclusion,  we  desire  to  emphasize  the  desira- 
bility of  as  quick  a  decision  as  possible  by  Congress 
on  this  weighty  question.  Space  will  permit  of  only 
the  barest  reference  to  the  profound 
Full  speed  changes  in  the  currents  of  the  world's 
ahead  commerce  that  will  surely  result  from  the 

world  war  and  the  full  use  of  the  Panama 
Canal.  The  enormous  merchant  marine  in  process  of 
creation  must  continue  to  be  used  when  peace  returns. 
Preparedness  for  peace  cannot  be  neglected  except 
for  war  measures,  but  should  go  on  where  consonant 
with  them.  And  it  is  difficult  to  see  in  what  better 
.  .  direction  preparedness  for  peace  could 

gigan  ic  move  than  in  perfecting  our  harbor  fa- 
harbor  .  j,-  £  • 

facility  cilities  for  handling  foreign  commerce. 

The   free   port  arrangement  is   simply 

Page      Twenty-five 


a  gigantic  harbor  facility,  and,  we  believe,  one  that 
can  be  made  most  fruitful  in  its  application  to  our 
country.  It  will  take  much  time  and  labor  and  money 
to  carry  it  out,  and  the  period  of  indispensable 
preparation  should  not  be  postponed  longer  than  is 
necessary. 


I*  age      Twenty-six 


ADDENDA 


REPORT   OF   SUB-COMMITTEE    ON   CUSTOMS 
MATTERS 

Concrete  examples       We   have  given   considerable   time   to  the 
of  obstacles  to  effort    to    obtain    concrete     examples     of 

foreign  trade  delays  and  expense  that  the  importers  and 

vessel  owners  have  been  put  to  by  reason 
of  having  to  comply  with  customs,  rules  and  regulations, 
confining  ourselves  to  those  that  would  be  eliminated  by  the 
establishment  of  a  free  port. 

Very  rightly  it  has  been  said  that  customs  is  the  first  and 
last  word  on  this  subject,  and  our  committee  has  endeavored 
to  forecast  the  movements  of  the  foreign  commerce  of  this 
port  with  respect  to  sources  and  classes  of  merchandise  in 
order  to  understand  where  this  increased  commerce  would 
encounter  delays  and  expense  due  to  customs  supervision. 
We  have  also  had  to  take  into  consideration  that  the  present 
tariff  is  one  mainly  for  revenue  only  and  that  another 
Administration  might  revert  to  larger  and  more  numerous 
protection  features,  and  hence  many  articles  such  as  coal, 
hides,  coffee,  etc.,  in  the  line  of  bulk  goods,  and  numerous 
manufactured  or  packed  goods  now  on  the  free  list  might 
again  become  dutiable  and  require  weighing,  gauging,  measur- 
ing, appraising,  etc.,  as  w.ell  as  examination  by  the  Pure  Food 
Inspector,  Bureau  of  Animal  Industry,  etc.  Therefore, 
although  we  are  able  to  report  on  some  of  the  hindrances 
that  have  existed  in  the  last  few  years,  undoubtedly  there 
are  many  more  difficulties,  which  existed  under  other  tariffs 
and  would  recur  with  a  change  of  tariff  laws. 
Advantages  detailed,  In  enumerating  some  of  the  advantages 
if  obstacles  removed  to  shipping  by  eliminating  customs  con- 
trol, we  summarize  as  follows : 

Page       Twenty-seven 


SAVING  OF  TIME  AND  EXPENSE  TO   VESSELS 

(a)  Delays  due  to  customs  boarding  officers  would  be  obviated. 

(b)  Prompt  docking  and  uninterrupted  discharge  of  cargo. 

(c)  Omitting    necessity    of    giving    heavy    bonds    to    customs, 
obligating  steamship   agents   to   pay  any   loss   of  duty  by 
fire,  theft,   casualty,  etc.,  and  the   consequent  delay  while 
these  matters  are  adjusted   with   the   customs. 

(d)  Not     being    required     to     make     application     to     customs, 
obtain    permit    and   pay   for   Inspectors'    services    when    it 
was   desirable   or   necessary  to  work  early  or  late   hours, 
or  on  Sundays   and   holidays. 

(e)  Bonded  and/or  foreign  cargo  laden  or  unladen  at  will. 

(f)  Vessel's  discharge  not  stopped  because  of  some  error  or 
delay  in  customs  papers,  which,  at  times,  besides  the  cost 
by  reason   of  delay,  has  entailed  fines  to  vessels  ranging 
from  $100.00  to  $5000.00. 

(g)  Not  being  required  to  keep  draw-back  goods  separate 
from  other  cargo  and  give  to  the  customs  officials  six 
official  hours  notice  before  lading  same. 

(h)  No  further  holding  of  teams  on  the  dock  until  Customs 
Inspector  is  able  to  check  all  bonded  goods  teams  may 
have,  before  loading  on  vessel,  or  unladen  bonded  goods 
teams  may  have,  for  export  vessel,  bonded  warehouse 
or  appraiser's  store; — this  checking  would  be  done  outside 
of  free  port.  Once  goods  were  placed  on  the  dock,  either 
from  or  for  the  vessel,  no  customs  delay  could  occur, 
thus  securing  more  prompt  clearing  of  docks. 

Considering    the     foregoing    few     items 
Savings  in  stevedor-        ^^    ^   .g  io  perceive   that  there 

ing  and  other  charges  . 

would  be  a  great  saving  in  stevedoring 

and  other  charges  because  of  frictionless  handling,  it  not 
being  necessary  to  stop  and  learn  whether  the  customs  had 
passed  this  or  checked  that  draw-back  or  bonded  package  if 
outgoing,  or  any  and  all  packages  if  incoming,  which,  if  it 
had  not  been  inspected,  would  have  to  be  passed  by  or 
moved  aside  until  the  Customs  Official  was  done  with  it. 
Also,  if  I  understand  correctly  the  methods  in  force  at 
Hamburg,  a  violation  of  the  Chinese  Exclusion  Act  and 

violations  because  of  the  desertion  of 

Governmental  inspec-  alien  seamen  in  this  port,  would  be  practi- 
tions  facilitated  cally  impossible  as  to  those  vessels  whose 

cargo  was  all  foreign  and  could  be  dis- 

Page    Twenty-eight 


charged  at  the  free  port  and  take  on  other  cargo  which  have 
been  assembled  there  for  them,  because  then  these  vessels 
would  not  touch  at  other  shores  of  San  Francisco  Bay,  and 
the  watchman  of  the  vessel  and  Harbor  Police  would  see 
that  these  people  were  kept  on  the  vessel  and  the  customs 
would  be  the  guards  at  the  other  gate  of  the  free  harbor  to 
stop  them,  provided  they  had  eluded  the  first  two  systems 
of  guarding.  At  the  outer  gate  those  with  the  right  to  enter 
the  United  States  would  be  examined  and  passed,  or  they 
could  be  taken  direct  from  the  vessel  on  the  tug  to  Immi- 
gration Station. 
_  f  All  shipping  men  are  very  familiar,  to 

Onerous  fines,  often  . 

undeserved  their  sorrow,  with  the  very   heavy  fines 

paid   for   violations   of   these   laws.     We 

will  note  a  half  dozen  items  of  fines  charged  covering  the 
recent  record  of  a  little  over  one  year  of  fines  assessed  to 
vessels  in  this  port  out  of  about  forty  different  causes: 

Vessel    fined    for    failure    to    produce    duplicate    bill    of 

health,   maximum    fine $5000.00 

Area  for  steerage  passengers   not  posted,  fine $  340.00 

And   additional   fine   against   the  master   of $  100.00 

Failure  to  include  certain  items  on  the  outward  mani- 
fest  of  vessel,   fine $  500.00 

Discharge  of  foreign  merchandise  without  authority  in 

absence  of  inspector,  fine 

Treble  the  value  of  merchandise  and  forfeiture  of  vessel 

In  this  case  the  master  had  gone  ashore,  and  the 
barge  man  and  the  mate,  who  were  unfamiliar  with 
Customs  regulations,  agreed  that  the  barge  could 
receive  cargo  in  the  stream,  remaining  alongside 
vessel  until  next  morning.  But  later  in  the  day  as  it 
appeared  a  storm  was  coming  up,  the  barge  man 
moved  the  barge  to  the  dock.  In  view  of  these  cir- 
cumstances, the  fines  were  mitigated  to  a  charge 

against  the  vessel  of $  700.00 

and  against  the  barge  owner  of $  200.00 

These  were  paid,  with  the  attorneys'  costs  and 
there  was  also  the  loss  of  time  in  preparing  and 
presenting  defense,  etc. 

Failure    to   make    entry   and    enter   merchandise    at    the 

Customs  House $1800.00 

Page      Twenty-nine 


Failure   to   enter  within   twenty-four  hours $  100.00 

Bonds  are  now  required  to  be  given  for  residue 
cargo  which  is  to  be  discharged  at  following  foreign 
ports  and  in  order  to  cancel  said  bonds  a  lading  cer- 
tificate or  other  evidence  is  required  from  abroad. 
This  is  a  heavy  obligation  and  it  is  sometimes  diffi- 
cult for  steamship  owners  to  obtain  the  necessary 
certificates  to  cancel  said  bonds. 

There  are  many  more  cases  of  minor  infractions  of  our 
Customs  rules,  some  perhaps  because  the  Government  under 
whose  flag  the  vessel  sails,  does  not  enforce  certain  rules  that 
we  do,  such,  to  give  a  few  examples,  as  those  in  our  so- 
called  seamen's  bill,  those  laws  requiring  the  marking  of 
part  of  the  equipment  of  a  vessel,  and  the  maintenance  of 
two  compartments  exclusively  for  hospital.  Frequently,  fines 
are  assessed  for  breaking  the  Customs  seals,  and  for  error  in, 
or  for  not  filing,  complete  store  list  of  vessel.  These  fines 
are  sometimes  mitigated  and  sometimes  remitted.  But  in 
such  cases  the  offense  has  been  trivial,  or  there  were  exten- 
uating circumstances.  Nevertheless,  discharge  of  vessel  has 
been  stopped,  master  or  owner  has  had  to  attend  at  the 
Customs  House  and  expense  has  been  incurred  in  defending 
the  charge. 

The  foregoing  few  items  clearly  indicate  that 
Tramp  steamers  & 

attracted  a  *ree  zone>  eliminating  such  annoyances  and 

losses  undoubtedly  is  beneficial  to  vessels 
and  particularly  attractive  to  new  liners  or  tramps,  they 
knowing  that  costly  fines  and  delays  encountered  with  Cus- 
toms would  not  be  possible  at  the  San  Francisco  Free  Harbor. 
For  to  steamships,  most  emphatically,  time  is  money,  and 
the  knowledge  that  all  Customs  requirements  were  done 
away  with,  would  be  the  greatest  inducement  possible  to  offer 
for  other  ships  to  come  to  this  port. 

...        A  seaport  originates  and  grows  principally 
Free  ports  act  like  °  .  J 

magnets  to  trade  because  of  the  export  and  import  trade  of 
its  own  country.  But  the  facilities  devel- 
oped for  this  trade  render  such  a  port  also  the  natural  center 
where  trade  between  neighboring  foreign  countries  will  focus. 
The  small  ports  of  Mexico,  of  Central  America,  even  the 

Page      Thirty 


Atlantic  ports  of  South  America,  cannot  have  direct  sailings 
to  and  from  all  Oriental  ports.  It  will  be  natural  for  many 
of  the  goods  from  these  ports  to  be  transshipped  here, 
especially  as  San  Francisco  is  but  four  or  five  hundred  miles 
off  the  great  circle  steamer  track  between  the  Panama  Canal 
and  the  ports  of  China,  Japan  and  Siberia.  But  as  long  as 
we  maintain  a  tariff,  means  must  be  provided  to  diminish  or 
eliminate  entirely  the  avoidable  obstacles  which  it  presents 
to  the  class  of  trade  just  described.  Three  different  plans 
have  been  devised.  Two  of  them — the  draw-back  system,  and 
the  system  of  bonded  warehouses — are  in  use  at  American 
ports.  If  they  were  adequate,  this  report  would  not  have 
been  written. 

We  should  provide  a  better  means  of  procedure  for  export 
trade,  leaving  the  bonded  warehouse  to  supply  a  necessary 
method  of  handling  foreign  goods  for  domestic  consumption. 

THE  BONDING  SYSTEM 

Under   the   bonded   warehouse    system,    dutiable 

Bon aed 

warehouses  goods  may,  before  the  duty  is  paid,  be  taken 
from  wharf  to  warehouse;  whence,  at  any  time 
-within  three  years  they  may  be  exported.  At  the  end  of 
three  years  the  duty  must  be  paid ;  likewise,  if  it  is  at  any 
time  desired  to  use  the  goods  in  the  United  States.  And  to 
insure  that  the  goods  be  not  used  without  payment  of  duty 
the  hauling  to  and  from  dock  and  the  storage  must  be  done 
by  business  concerns  who  have  given  heavy  bonds  to  the 
Government.  In  addition,  the  owner  of  the  goods  must  also 
be  bonded  in  the  amount  of  double  the  duty  that  would  have 
to  be  paid,  should  the  goods  be  smuggled,  lost,  'stolen  or 
destroyed. 

The    movements    of    the    goods    have    all    to    be 

Restricted  ,    ,  & 

operations  under  the  supervision  of  Customs  Inspectors,  and 
the  bonded  warehouse  is  in  charge  of  a  Customs 
Storekeeper,  by  whom  it  is  closed  with  a  special  Government 
lock  during  the  noon  hour  and  outside  of  business  hours,  so 
that  not  even  the  owner  of  the  warehouse  may  enter  during 
his  absence.  No  work  within  the  warehouse  is  possible  out- 
side of  these  hours  without  special  permission  and  heavy 

Page      Thirty-one 


expense  for  Customs  overtime.  Goods  must  be  piled  so  that 
they  can  be  checked  at  any  time  by  special  Treasury  Depart- 
ment Agents.  A  multitude  of  other  rules  must  be  observed 
far  too  numerous  to  mention,  so  numerous  in  fact,  that  they 
occupy  three  chapters  of  the  present  Customs  regulations. 

It  is  obvious  that  the  expense  of  the  bonds 
and  the  required  supervision,  in  transit,  upon 
receipt,  while  in  warehouse,  upon  delivery,  and  again  in 
transit,  not  only  directly  increases  the  expense  of  handling 
and  storage,  but  also  indirectly,  through  the  slower  move- 
ment entailed. 

W  rkin  ith  There  are  otner  disadvantages,  altogether  too 
hands  tied  numerous  to  be  detailed  here.  We  will  briefly 

hint  at  one  or  two.  Cases  can  be  opened  only 
when  damage  to  the  goods  is  threatened  and  special  permis- 
sion first  must  be  obtained  and  the  work  done  in  presence 
of  Customs  officers.  Goods  cannot  be  transferred  to  other 
cases,  either  in  whole  or  in  part.  Duty,  if  paid,  must  be 
based  on  original  value,  and  must  be  paid  on  full  contents  of 
the  package,  even  when  there  has  been  deterioration  during 
storage.  We  will  merely  hint  at  the  expense  involved  in 
general  orders  to  store  goods  as  unclaimed  and  at  the  further 
stringent  rules  applicable  to  warehouses  bonded  for  special 
classes,  such  as  spirits  and  tea.  Enough  has  been  said  to 
show  that  the  device  of  bonded  warehouses  falls  far  short  of 
meeting  the  requirements  of  a  large  foreign  trade  under 
competitive  conditions. 

THE  DRAW-BACK 

When  the  dutiable  article  is  a  raw  material  used  in  manu- 
facture either  alone  or  with  other  raw  materials  native  or 
foreign,  the  bonding  system  of  course  cannot  be  used,  and  the 
Customs  provides  that,  upon  the  export  of  such  manufac- 
ture, a  rebate  of  the  duty  is  granted  on  such  part  of  the 
actual  foreign  material  as  is  contained  in  the  exported  manu- 
facture. To  illustrate,  imported  chicle  is  used  in  the  manu- 
facture of  chewing  gum ;  imported  feathers  in  making  pillows 
and  mattresses;  foreign  tin  plate  was  formerly  used  in  large 
quantities  in  making  cans  for  our  salmon  and  fruit.  When 

Page       Thirty-two 


the  gum  is  exported  the  duty  of  15  cents  per  pound  on  the 
chicle  is  subject  to  draw-back  (after  deducting  1%)  and 
similarly,  as  to  the  feathers  and  the  tin  plate  actually  used  in 
the  cans. 

Here  again,  however,  is  a  complicated 

A  complicated  system,  °  r 

hating,  vexatious  and    difficult     system.       The     imported 

goods    must    be    kept    separate    in    the 

factory,  its  records  must  be  kept  as  prescribed,  and  both 
goods  and  records  must  be  open  to  inspection  at  any  time. 
If  the  factory  is  incorporated,  its  articles  of  incorporation 
must  be  filed  at  the  Customs  House;  six  official  hours  notice 
of  lading  upon  export  vessel  must  be  given,  so  that  the 
inspector  may  be  present  and  check  the  goods ;  oaths  to  all 
transactions  must  be  filed  by  importer,  foreman,  superin- 
tendent and  exporter;  trade  secrets  as  to  manufacture  must 
be  disclosed.  Finally,  evidence  of  foreign  landing,  or  a  bond 
to  obtain  such  evidence,  must  be  furnished.  If  all  this,  and 
still  other  details,  be  properly  attended  to,  the  draw-back  is 
payable  thirty  days  after  shipment. 

So  complicated  and  unsatisfactory  is  this  system  that  it 
can  be  used  with  profit  only  in  a  very  large  export  business. 
Quite  a  few  of  our  local  merchants,  after  experience,  aban- 
doned all  thought  of  applying  for  the  draw-back. 

IMPORTATIONS  FOR  CONSUMPTION  IN  THE 
UNITED  STATES 

.,  ,     ..  The  matter  of  valuation  is  one  of  the  most 

Valuations  a  great 

puzzle  difficult  features,  and  one  about  which  all 

importers  have  at  one  time  or  another  some 
trouble  with  the  Customs.  The  value  must  be  the  wholesale 
market  value  in  the  principal  markets  of  the  country  or  place 
of  shipment  at  the  time  of  shipment.  Frequently,  goods  are 
bought  under  contract,  or  for  some  reason  the  shipper  sells 
at  a  lower  price.  The  chairman  of  this  sub-committee  was 
recently  told  the  following  instance  by  an  importer :  Under  a 
previous  tariff  hides  were  dutiable.  A  Mexican  rancher  had 
shipped  some  hides  to  this  importer.  In  that  country,  hides 
are  a  sort  of  by-product,  of  practically  no  value,  so  a  nominal 

Page      Thirty-three 


value  was  placed  on  the  invoice.  This  was  raised  by  the 
Customs,  and  the  importer  was  required  to  pay  a  heavy 
fine,  the  reason  for  which  the  shipper  is  naturally  quite 
unable  to  understand.  Using  the  Spanish  for  "Never  Again," 
he  is  shipping  no  more  hides  to  this  port. 

A  large  shipment  of  refrigerated  egg  meat  in  tins 

Illustrations  •,  r  x->.    .  ,    , .     ' 

arrived  on  one  of  our  Oriental  liners  some  time 
ago.  The  goods  could  not  be  landed  until  arrangements  had 
been  completed  to  haul  at  once  to  a  bonded  refrigerated 
warehouse.  But  there  was  no  wholesale  market  at  the  place 
of  shipment,  and  the  question  of  value  required  telegrams, 
cables  and  much  discussion  with  the  Customs,  and  caused 
heavy  expense  because  of  delay  to  vessel,  of  overtime  charges 
at  vessel  and  at  warehouse  charged  by  draymen,  stevedores, 
ship's  clerks,  Customs  Inspectors,  weighers  and  custom's 
storekeeper.  In  a  similar  New  York  case,  the  importer,  to 
keep  the  vessel  moving,  took  a  chance  on  his  invoice  value, 
and  had  to  pay  some  thirty  thousand  dollars  in  fines. 

In  addition  to  the  rules  designed  to  in- 

Numerotts  other  laws 

and  rules  '  sure  collection  of  the  duty,  the  Customs 

is  charged  also  with  the  enforcement  of 

certain  other  complicated  laws,  such  as  the  Chinese  Exclusion 
Act,  the  Pure  Food  Law,  the  laws  under  the  Bureau  of 
Animal  Industry,  the  Copyright  Law,  etc. 

„.  ,  .  .       When  damaged  goods  arrive,  they  must  be 

Disputes  multiply  J 

needlessly  held  on  the  wharf  until  the  Customs  adjust 

with  the  importer.  Frequently,  marks  are 
obliterated.  Sometimes  the  condition  is  such  that  it  is  im- 
possible to  get  a  count  of  the  damaged  portion.  Conse- 
quently, there  is  apt  to  be  a  dispute  involving  the  importer, 
vessel  and  Customs.  The  importer  is  not  permitted  to  recon- 
dition the  goods,  because  the  identity  would  be  lost  or  it 
would  be  impossible  to  keep  such  a  check  that  proper  duties 
would  be  paid.  In  many  cases  it  is  cheaper  to  accept  the 
only  method  provided  by  Customs  laws  and  abandon  the 
goods,  provided  that  the  portion  damaged  is  more  than  10% 
of  the  shipment.  But  the  damage  must  be  discovered  and 
the  goods  abandoned  within  ten  days  after  making  entry. 

Page       Thirty  -four 


THE   FREE  PORT  AS   AN   INDISPENSABLE   AID 
TO  RE-EXPORT  TRADE 

Enough  has  been  said  to  show  how  utterly  impossible  it  is 
to  think  of  our  controlling  any  large  amount  of  the  trans- 
shipping trade  between  foreign  ports  until  some  means  is 
adopted  to  avoid  entirely  the  Customs  barrier  as  regards 
such  trade.  The  only  method  that  has  been  suggested  is  the 
Free  Port. 

We  shall  endeavor  to  illustrate  by  concrete  examples  the 
various  advantages  which  have  been  set  forth,  and  we  think 
it  can  be  shown  that  the  establishment  of  Free  Ports  in  this 
country  would  benefit  not  only  the  seaports  at  which  they 
might  be  located,  but  would  also  be  of  immense  advantage 
to  the  export  trade,  to  manufacturers,  to  banking  interests 
and  to  the  country  generally. 

The  interrelations  of  the  various  factors  of  trade  are  such 
that  each  reacts  on  all  the  others.  Any  facility  which  in- 
creases trade  thereby  brings  nearer  the  range  of  possibility 
larger  facilities  which  would  involve  too  much  capital  or  too 
much  space  for  the  smaller  trade.  Increased  quantities  mean 
lower  prices  and  cheaper  freight  and  these  again  open  new 
markets  and  again  increase  quantities.  In  this  way  the  vari- 
ous advantages  which  we  can  anticipate  if  Free  Ports  be 
legalized  would  be  cumulative,  and  the  ultimate  development 
might  very  well  surprise  the  most  optimistic.  This  aspect 
of  the  question  should  be  borne  in  mind  in  what  follows. 

GRADING,  REPACKING  AND  SORTING 

If  after  goods  were  landed  in  the  Free  Port,  sorting  and 
grading  by  the  importer  showed  that  some  portion  would 
not  be  allowed  into  this  country,  such  goods  would  be 
regraded  and  packed  for  any  foreign  markets  available.  If  it 
were  desired  to  ship  two  or  three  articles  out  of  one  case  to 
Salvador  and  two  or  three  others  to  Guatemala,  and  so  on, 
it  could  be  done.  This  would  increase  imports  greatly,  since, 
first,  the  cost  abroad  would  be  less  (buying  in  bulk  and 
unsorted,  etc.),  and,  second,  the  larger  quantities  purchased 
would  aid  in  lowering  the  cost  price. 

Page       Thirty-five 


There  are  undoubtedly  many  articles  that  could  be  im- 
ported into  a  Free  Port  and  regraded,  repacked,  or  recondi- 
tioned, or  small  quantities  of  which  could  be  taken  out  of 
one  case  and  used  to  fill  into  cases  with  other  goods  suitable 
for  certain  foreign  markets.  As  one  example,  beans.  In 
1910,  when  I  returned  from  a  trip  to  the  Orient,  I  mentioned 
to  one  of  the  large  bean  dealers  of  this  city  that  an  immense 
amount  of  beans  was  to  be  had  in  Japan,  Manchuria  and 
Siberia.  He  replied  that  they  would  buy  shiploads  of  this 
commodity  if  they  were  able  to  buy  graded  goods;  that  the 
main  trouble  was  that  the  Oriental  shipper  did  not  know 
how  to  grade,  or  would  not  do  it,  and  when  the  goods 
arrived  here  it  was  impossible  for  the  importer  to  sell  them. 
I  expressed  surprise  because  we  grew  beans  to  such  a  large 
extent  here,  but  he  said  that  the  demand  was  so  great  that 
they  could  take  any  amount  of  beans  and  sell  from  this 
market  if  they  only  had  a  way  of  selecting,  grading  and 
packing  such  goods  in  the  Orient,  so  that  when  they  arrived 
here  they  could  be  immediately  sold  and  dispatched.  Mani- 
festly, a  Free  Port  here  would  put  the  importer  in  the  posi- 
tion as  though  his  beans  were  in  the  foreign  country  just 
outside  of  his  door.  In  other  words,  he  would  step  across 
to  the  Free  Zone,  do  the  packing,  regrading,  etc.,  himself, 
pay  his  duty  on  the  portion  which  he  desired  consumed  in 
the  United  States  and  export  the  other  without  molestation 
from  officials. 

Other  familiar  examples  are  pepper  from  Singapore,  rice 
from  China,  coffee  from  Central  America,  matches  from  Japan 
and  gums  from  Java.  The  resorting,  regrading,  repacking, 
etc.,  of  these  goods  into  such  shape  as  is  necessary  for  cus- 
tomers at  other  foreign  points,  our  merchants  cannot  handle 
because  of  Customs  hindrances,  whereas  a  Free  Port  would 
permit  all  of  this. 

Very  recently  the  Customs  regulations  have  been  changed 
as  to  the  bonds  given  by  importers  so  that  one  bond  given 
by  an  importer  obligates  him  to  fulfill  all  of  the  terms  of  the 
laws  under  the  Customs  and  other  before-mentioned  Acts, 
and  it  frequently  occurs  that  shippers  sometimes  without 
knowing  better,  and  at  other  times  for  the  purpose  of 

Page      Thirty-six 


"getting  by",  send  articles  to  importers  which  are  in  violation 
of  the  aforesaid  laws  and  the  importer  knows  nothing  about 
it  until  after  his  entry  has  been  made  and  he  has  become 
the  victim  and  therefore  must  pay  the  penalties.  Had  the 
goods  been  landed  at  a  Free  Port,  he  would  have  taken  his 
samples,  probably  place  some  of  the  goods  in  warehouses  of 
the  Free  Port,  and  there  made  his  entry  for  those  goods 
which  were  in  the  proper  condition  for  making  entry. 

A  Free  Port  would  obviate  much  of  the  disturbance  inci- 
dent to  a  change  of  tariff.     To  illustrate :    Coffee,   tea,   and 
other  commodities,   which  are  free  of  duty  are   collected   at 
this  port,  often  in   small   lots,  and  when   foreign  orders  are 
received,  they  are  filled  from  these  shipments.     When  upon 
our  declaration  of  war,  it  became  necessary  to  devise  addi- 
tional  taxes,    it   was   proposed   to   levy    a 
duty    upon    these    commodities.      What    a 

Free  port  easily  con-       r  ,,  .  ,         .,,      jt  ^ 

-  .,/  furore  this  created  with  the  trade.     Con- 

forms to  tariff 

changes  tracts    for    either    foreign    or    local    trade, 

made  at  prices  based  on  no  duty,  could 
not  have  been  filled  without  loss,  because 
it  would  have  been  impossible  to  find  transportation  for  a 
sufficient  quantity  before  the  new  law  would  have  become 
effective.  If  we  had  had  a  Free  Port  the  foreign  trade  would 
have  continued  without  interruption,  while,  on  all  goods 
finally  entering  the  United  States  for  consumption,  the  Gov- 
ernment would  have  received  its  duty  in  due  time.  Further- 
more, owing  to  the  increase  of  business  which  this  existence 
of  a  Free  Port  here  would  bring  about,  as  previously  explained, 
the  stocks  on  hand,  being  graded  and  awaiting  foreign  orders, 
would  have  been  so  much  larger  than  were  actually  on  hand, 
that  existing  local  contracts  could  have  been  completed 
before  the  duty  would  have  become  effective. 

Recently  an  order  came  here  from  Russia  for  100,000  bags 
of  coffee.  Had  coffee  not  been  free  of  duty  and  no  Free  Port 
here,  this  market  could  not  have  had  that  trade  because  the 
answer  to  the  prospective  buyer  must  have  been : 

"It  is  too  bad,  but  we  have  paid  duty  on  this  coffee  and 
cannot  now  quote  you  a  good  price." 

Page      Thirty-seven 


BENEFITS  TO  THE  INTERIOR— TO   THE  WHOLE 
UNITED    STATES 

Although  it  might  seem  that  the  freedom  of  the  port  would 
contribute  mainly  to  the  encouragement  of  importations  from 
foreign  ports,  yet  it  is  manifest  that  such  encouragement  to 
come  to  this  port  would  thereby  be  given  to  so  many  steam- 
ship lines,  and  to  tramps  and  sailing  vessels,  that  our  whole 
state  and  other  states  of  the  United  States  that  produced 
anything  suitable  for  a  foreign  market  would  also  be  very 
greatly  benefited,  because  there  would  always  be  .vessels  here 
ready  to  move  their  commodities.  The  interior  merchant, 
manufacturer  and  farmer  would  not  find  to  his  sorrow,  that 
his  shipment  was  not  on  the  ocean,  but  held  with  some 
thousands  of  cars  of  freight  in  this  port  that  are  destined  for 
the  Orient,  Australia,  etc.,  for  which  we  have  no  vessels  and 
no  warehouses,  as  is  the  condition  today.  And  such  loss 
would  not  be  avoided  in  many  cases,  even  in  times  of  peace. 

Hamburg  ^s  ^°  Hamburg,  I  recall  some  ten  years  or  so  ago, 
long  before  the  war,  a  forwarder  of  Hamburg  came 
to  the  United  States  and  made  contracts  with  large  houses  all 
over  the  Union,  at  both  sea-ports  and  interior  cities,  to 
furnish  them  with  their  goods  from  Germany  and  Austria 
within  a  certain  period.  There  was  to  be  no  uncertainty 
about  receiving  Christmas,  Easter,  or  other  seasonal  goods, 
in  time.  He  secured  a  large  business.  Necessarily,  that 
meant  that  he  visited  the  factories  all  over  Germany  and 
Austria,  and  instructed  these  people  when  and  how  to  for- 
ward the  goods  by  rail  or  river  or  canal  up  to  the  Free  Port; 
here  he  sorted  the  assembled  goods  and  marked  them,  and 
when  the  steamer  arrived  in  the  Free  Port  of  Hamburg,  the 
vessel  got  quick  dispatch  and  the  shipper  low  freight  rates. 
There  was  no  such  disorganization  as  we  have  in  recent 
years  witnessed  at  East  and  West  ports  in  the  United  States, 
loaded  cars  shunted  here  and  there  awaiting  steamers, 
perishable  goods  spoiled,  sales  lost,  because  goods  did  not 
reach  destination  on  time,  and  the  interior  farmer  merchant 
or  banker  disgusted  with  efforts  to  do  foreign  business. 

Page       Thirty-eight 


Copenhagen  In  tne  Free  Port  of  Copenhagen,  the  importer 
can  secure  up  to  75%  of  the  value  of  his  stored 
goods.  Though  it  is  a  little  out  of  the  province  of  this  Sub- 
Committee,  we  may  be  pardoned  for  calling  attention  to  the 
opportunities  which  the  banks  might  anticipate  through  loans 
on  goods  temporarily  in  port.  The  large  item  of  handling 
exchange  on  all  the  greatly  increased  shipments  is  obvious. 

It  is  recognized  that  we  are  a  producing  country  now,  with 
a  surplus  to  dispose  of,  and  foreign  markets  are  absolutely 
necessary. 

Our  people  only  faintly  apprehend  the  degree  to  which  our 
foreign  commerce  is  dominated  by  Customs  control.  Every 
move  made  by  vessel  or  cargo,  master  or  importer,  respect- 
ing foreign  goods  must  first  have  sanction  of  Customs. 

We  hear  the  cry  of  "crowded  docks".  "If  we  could  only 
make  consignees  take  the  cargo  away".  You  say,  "Con- 
signees make  the  excuse,  'Customs  have  not  issued  permits;' 
we  want  more  docks".  What  good  would  more  docks  do 
other  than  to  make  more  room  on  docks  for  importers  to 
use  as  warehouses,  unless  you  get  customs  dispatch?  Does 
it  not  seem  clear  that  a  Free  Port  solves  the  problem  as  to 
foreign  cargo  and  further,  thereby,  releasing  other  docks  for 
domestic  cargoes? 

THE  OPPORTUNE  TIME 

America  is  now  about  to  get  its  ships.  Millions  will  be 
spent  on  the  shores  of  this  harbor  for  shipbuilding  plants. 
Other  millions  will  be  devoted  to  harbor  facilities  to  take 
care  of  the  trade  the  ships  will  bring.  We  are  told  that  the 
Government  is  to"  build  fleets  of  river  boats.  The  railroad 
terminals  will  be  enlarged  with  reference  to  the  harbor  plans. 
A  period  of  tremendous  trade  development  is  certainly 
imminent.  Is  all  this  to  go  on  without  any  provision  for 
the  elimination  of  the  intolerable  friction  inseparable  from 
present  arrangements?  It  is  unthinkable.  No  comprehen- 
sive plan  for  harbor  development  can  be  undertaken  unless 
provision  is  included  for  the  establishment  of  a  Free  Port 
on  such  a  basis  that  its  facilities  for  years  to  come  can  keep 
abreast  of  the  harbor's  increasing  trade. 

Page      Thirty-nine 


REPORT  OF  SUB-COMMITTEE  ON  FOREIGN  TRADE 

So  numerous  are  the  angles  of  approaching  the  subject  of 
a  Free  Port  or  Free  Zone  policy  that  a  great  deal  of  time 
and  space  could  be  devoted  to  its  discussion. 

Foreign  experience       The    T^d    and    SubStantial    growth    of    Free 

teaches  Ports    operated    by    other    nations,    whose 

business  consists  mainly  in  transshipment 
and  exportation,  however,  furnish  convincing  data  in  favor 
of  such  a  national  move. 

The  universal  testimony  appears  to  be  that  a  Free  Port 
has  aided  immensely  in  quickly  building  up  both  the  foreign 
and  domestic  trade  of  every  harbor  where  it  has  been  prop- 
erly established. 

Exam  les  ^nen  we  realize  that  Hamburg  in  1913  had  forged 
abroad  ahead  until  its  foreign  trade  surpassed  London  by 
One  Hundred  Million  Dollars  and  far  exceeded 
Liverpool  in  imports,  notwithstanding  the  fact  that  England 
is  a  free-trading  country;  that  Hamburg's  total  foreign  com- 
merce was  only  Six  Million  Dollars  under  that  of  New  York, 
and  that  Hongkong  surpassed  New  York  in  clearing  foreign 
trade  tonnage  several  years  before  the  war,  Singapore 
advancing  as  a  collecting  and  distributing  center,  and  Copen- 
hagen winning  the  trade  of  the  Baltic,  it  becomes  apparent 
that  the  Free  Port  is  not  a  mere  theory,  but  a  practical 
producer  of  prosperity. 

Traveling  and  visiting  many  harbors,  making  observations 
and  holding  discussions  with  captains  and  shippers  large  and 
small,  will  demonstrate  to  anyone  the  important  place  that 
harbor  facilities  occupy  in  the  commercial  development  of  a 
city. 

Industrial    and    commercial    development 

Transportation,  back- 
bone of  commerce  are  dependent  upon  transportation.     The 
efficiency  of  transportation,  rail  or  water, 
is  measured  by  the  cost  and  speed  of  handling  goods. 

Inadequate  harbor  facilities  poorly  correlated  with  rail- 
road transportation  are  prime  contributors  to  the  high  cost 
of  living,  as  slow  and  expensive  circulation  of  supplies 

Page        Forty 


inevitably  add  to  their  cost.  It  is  obvious  that  the  more 
hands  through  which  goods  pass  from  producer  to  con- 
sumer, the  more  the  public  must  pay. 

Seek  sea- efficiency         The    Wal"   haS    made    OUr    Pe°Ple    appreciate 

more  than  ever  before  that  we  cannot 
claim  or  hold  commercial  supremacy,  if  we  are  inefficient 
on  the  sea. 

At  the  opening  of  the  Civil  War  American  ships  were 
carrying  70%  of  our  exports  and  65%  of  our  imports. 

,  At    the    opening    of    the    world    war    in 

Revive  our  merchant 

mar;ne  August,    1914,    Great    Britain,    Germany, 

France,    Italy,    Japan,    Austria-Hungary, 

Russia,  and  Belgium  controlled  72%  of  the  world's  ocean 
carrying  capacity,  and  although  our  foreign  trade,  exports 
and  imports  combined,  amounted  to  Four  and  a  Half  Billion 
Dollars,  or  more  than  one-tenth  the  world's  business,  our 
merchant  marine  was  capable  of  transporting  only  nine 
per  cent,  of  it. 

At  the  end  of  the  war  we  will  have  materially  gained  in 
tonnage,  and  Old  Glory  will  be  floating  from  the  taffrail  of 
a  powerful  merchant  fleet. 

It  is  then  that  the  need  of  Free  Zones  in  the  United  States 
will  become  immediately  apparent  and  immeasurably  valu- 
able. 

~       .        .  Your  Sub-Committee  on   Foreign  Trade   sent 

(Questionnaire  ° 

sent  out  out  a  questionnaire  a  copy  of  which  is  hereto 

attached — to  leading  firms  engaged  in  or  inter- 
ested in  shipping  activities,  and  obtained  much  helpful 
information  regarding  advantages  which  a  Free  Port  would 
lend  to  develop  Foreign  Trade  through  the  Port  of  San 
Francisco.  This  was  supplemented  by  individual  research 
and  investigation,  personal  interviews  and  discussions, 
o  f  ,  As  a  result  of  this  work  we  are  able  to 

Resume  of  advantages 

to  foreign  commerce        present  a  resume  containing  a  variety  of 
arguments    showing    the    benefits    of    a 
developed  and  properly  organized   Free  Port. 


Page      Forty-on 


1 — Ports  are  the  gateways  through  which  commerce  must 
pass.  Every  form  of  waste,  whether  of  time  or  money, 
that  can  be  eliminated,  means  to  that  section  and  to 
the  country  added  facilities. 

2 — The  establishment  of  Free  Ports  will  tend  to  encourage 
new  business  and  make  land  area  more  valuable  as  a 
terminal  and  cheaper  as  an  entrepot.  Traffic  follows 
the  line  of  least  resistance,  with  saving  of  time,  labor 
and  money. 

3 — By  handling  traffic  more  economically  and  expeditiously 
a  Free  Port  or  Free  Zone  will  encourage  and  give 
impetus  to  surplus  production,  and  benefit  shippers, 
consignees  and  consumers. 

A — Free  Ports  will  be  the  means  of  saving  interest  on  large 
sums  of  money  by  precluding  the  necessity  of  tying 
up  funds  for  Customs  duties  whilst  goods  are  held  in 
warehouses. 

5 — Free  Ports  will  increase  the  speed  and  decrease  the 
cost  of  receiving,  transferring  and  reshipping  of  mer- 
chandise. 

6 — Free  Ports  accord  facilities  for  unloading  goods  which 
may  be  stored,  packed,  mixed,  assembled,  manipulated 
and  even  manufactured  within  the  Free  Zone  with  the 
greatest  possible  freedom.  Manufacturers  are  accorded 
the  privilege  of  exhibiting  and  demonstrating  their 
goods,  grading  and  altering  same  for  domestic  or 
export  use.  Buyers  can  examine,  test  and  compare  the 
commodities  of  the  world  before  making  purchases. 

7 — Well  developed  Free  Ports  or  Free  Zones  in  the  United 
States  stimulate  the  growth  of  exporting  houses  and 
enable  them  to  hold  goods  for  set  periods  without  the 
payment  of  duties,  often  equal  to  the  cost  of  the 
commodity  itself.  Besides  supplying  a  more  con- 
venient outlet  for  American  goods,  Free  Ports  will  aid 
the  American  manufacturers  in  need  of  foreign  sup- 
plies by  bringing  raw  material  to  our  shores  cheaply 
for  subsequent  import  or  export,  as  the  needs  of  the 
trade  demand. 

Page      Forty-two 


8 — The  number,  speed  and  efficiency  of  cargo  boats  will 
be  greatly  increased  and  in  this  direction  a  Free  Port 
becomes  a  vital  factor  in  enabling  us  to  meet  the 
foreign  trade  demands  that  will  be  placed  upon  us 
after  the  war. 

The  harbor  of  San  Francisco,  when  it 

San  Francisco,  a  natural       r  , <  ,  r    -rt 

,.          ,    '      .  first  met  the  enraptured  gaze  of  Por- 

tradmg  and  shipping  r  » 

center  between  nation,          tola>     November     1st,     1769,     possessed 

more     advantages     than     others     less 

richly  endowed  by  nature.  Since  then  its  golden  portals  have 
been  open  the  year  round  and  never  required  dredging, 
maintaining  a  permanent  unshifting  depth  of  48  feet.  San 
Francisco  Bay  has  always  been  able  to  admit  the  largest  of 
the  world's  vessels,  and  all  of  them  combined  could  find 
anchorage  here  and  be  sheltered  in  summer  and  winter  from 
heat  and  cold,  from  heavy  seas  and  squalls  and  storms. 

Gatewa  between  ^an  Francisco  is  not  only  the  gateway  of 
East  and  West  tne  Far  West  but  it  is  the  gateway  to  the 

Far  East.  More  than  half  a  century  ago 
Bret  Harte  called  San  Francisco  "the  warden  of  two  con- 
tinents". 

Gazing  out  through  the  Golden  Gate  across  the  broad 
expanse  of  the  Pacific  we  look  through  the  open  door  of 
China.  What  an  inexhaustible  market  China  would  be  for 
our  products,  if  we  went  after  it ! 

Japan,  rapidly  winning  a  place  in  the  sun  and  becoming 
western  in  constitution,  civilization  and  commercial  relation- 
ships, offers  a  most  attractive  field  for  our  products. 

A  warm  welcome  awaits  American  representation  and 
American  goods  in  all  Australasian  markets. 

The  Philippines  present  a  pleasant  picture.  Ten  years 
ago  we  furnished  the  Islands  only  26%  of  their  imports. 
We  now  supply  50%,  and  they  would  gladly  buy  the  other 
50%  from  us,  if  we  could  offer  more  adequate  transportation 
facilities. 

And  between  ^"S  we  ^°°^  southward  we  see  the  Republics 

North  and  South      °f   Central   and   South   America,   with   enor- 
mous   trade    potentialities.      How    vast    this 

Page       Forty-three 


trade  may  become  with  proper  attention,  encouragement  and 
systematic  development  can  hardly  be  overestimated.  Our 
foreign  trade  statistics  offer  convincing  evidence. 

..,,   J          ,  The  immediate  effect  of  war  upon  industrial 

What  war  has 

made  clear  an<^    commercial    policies    is    undoubtedly    to 

prompt  nations  to  make  themselves  as  nearly 
as  practicable  independent  in  all  things  necessary  to  life  and 
the  national  defense.  When  the  war  broke  out,  Great 
Britain  found  that  the  product  of  the  Australian  lead  and 
zinc  mines  was  under  contract  to  German  firms  and  that 
neither  in  Australia  or  Great  Britain  were  there  reduction 
works  adequate  in  capacity  to  convert  the  Australian  product 
into  the  munitions  of  war  which  were  needed  for  the  defense 
of  the  Empire.  Likewise,  the  great  textile  industries  of  the 
United  States,  Great  Britain  and  France,  were  found  to  be 
largely  dependent  upon  German  dyes. 

Ae        .  In  the  long"  period  of  peace,  international  trade 

After  the  war, 

what?  relations  had  expanded  and  confidence  in  the 

maintenance  of  peace  had  grown,  until  in 
many  instances  the  industries  of  countries  had  become  more 
or  less  inter-dependent.  Even  the  neutral  countries,  as  those 
of  South  America,  have  found  themselves  seriously  incon- 
venienced by  the  difficulties  attendant  upon  transportation, 
and  manifest  an  inclination  to  diversify  and  develop  their 
home  industries  to  a  greater  extent  than  before.  In  all 
conferences  between  representative  men  of  the  various 
dominions  of  the  British  Empire,  there  is  expressed  a  senti- 
ment favorable  to  more  intimate  trade  relations,  and  to  recip- 
rocal policies  which  will  tend  to  bring  this  about.  It  seems 
probable  that  steps  in  this  direction  will  be  taken,  although 
serious  difficulties  are  certain  to  develop  when  the  attempt 
is  made  to  reduce  such  a  policy  to  tangible  terms. 

Prepare  for  the  ^  may  ^>e  expected  that  the  alliances  estab- 
readjustments  of  Hshed  during  the  war  will  influence  trade 
foreign  trade  policies  to  some  extent  after  the  war,  and 

that  commercial  treaties  will  be  made  with  a  view  of  recog- 
nizing and  promoting  the  friendly  relations  which  exist. 
The  antagonisms,  in  turn,  which  have  been  developed  be- 

Page       Forty  -four 


tween  enemy  countries  will,  no  doubt,  affect  trade  relations 
for  many  years,  no  matter  what  the  terms  of  the  treaty  of 
peace  may  be.  On  the  whole,  it  may  be  expected  that  pro- 
tective tariffs  will  be  in  favor  after  the  war,  and  that  trade 
will  be  influenced  to  a  considerable  extent  by  commercial 
treaties.  In  this  connection,  it  is  to  be  considered  that  the 
United  States,  by  reason  of  the  great  purchasing  power  of  its 
people,  is  the  most  desirable  market  place  in  the  world,  and 
should  be  able  to  obtain  as  favorable  terms  for  trade  as  are 
granted  to  any  country. 


Page      Forty-fiv 


QUESTIONNAIRE  ADDRESSED   TO   SAN 
FRANCISCO'S  FOREIGN  TRADE 

1 — What  particular  products  imported  or  exported  by  your 
firm  would  be  affected  most  favorably  by  the  special 
facilities  offered  by  a  Free  Port,  such  as  expeditious  and 
economic  handling  of  merchandise  and  free  access  to  and 
control  of  your  own  goods,  packing,  mixing,  sorting, 
labeling,  manipulating,  manufacturing,  etc.,  without  the 
customary  "red  tape"  and  restrictions  connected  with 
bonded  warehouses? 

2 — What  would  be  the  specific  advantages  to  you  as  regards 
the  following: 

(a)  Conditioning, 

(b)  Assorting, 

(c)  Repacking, 

(d)  Stock  carrying, 

(e)  Firm  sale  basis  for  transactions. 

3 — What  dutiable  foreign  materials  do  you  import  and  utilize 
in  articles  that  you  re-export? 

4 — What  products  have  you  for  export  that  require  imported 
raw  materials  to  manufacture? 

5 — What* is  your  annual  volume  of  draw-backs? 

6 — What  substantial  benefits  will  be  conferred  upon  ship 
pers,  local  and  inland,  consignees  and  consumers  by 
attracting  more  cargo  and  ships,  more  transit  traffic  by 
making  this  harbor  a  base  for  transit  and  domestic  im- 
ports? 

7 — What  opportunities  for  foreign  trade  expansion  do  Free 
Port  facilities  offer? 

8 — What  do  you  consider  the  special  advantage  from  an  eco- 
nomic, industrial  and  commercial  standpoint  that  would 
result  from  the  establishment  of  a  Free  Port  Zone  on 
San  Francisco  Bay,  and  what  superior  advantages  have 
we  to  offer? 

9 — General  remarks. 

Page       Forty-six 


ANSWER  TO   QUESTIONNAIRE 
By  J.  H.  Polhemus 

1 — Practically  every  article  that  we  handle  or  would  hope  to 
handle  we  would  greatly  prefer  handling  in  a  free  port, 
inasmuch  as  we  do  not  confine  ourselves  to  importing 
goods  to  go  directly  to  consumption  in  the  United  States, 
but  operate  overseas  with  many  districts,  continuously 
endeavoring  to  bring  goods  in  from  one  section  and  for- 
ward them  on  to  another. 

2_(A)— CONDITIONING : 

In  regard  to  conditioning  the  number  of  cases  that  can 
be  quoted  is  unlimited.  By  way  of  mentioning  a  few 
we  might  state  that  corn  from  Spanish  America  arriving 
weevily  can  be  fanned,  put  in  new  sacks  and  re-exported 
to  some  other  Spanish-American  or  other  oversea  market 
and  thus  not  make  it  necessary  for  the  importer  to  agree 
to  sell  same  in  the  United  States  under  the  Pure  Food 
provisions  of  "Not  for  Human  Consumption."  Lots  of 
coffee  that  might  arrive  too  low  to  pass  government 
specifications  can  be  mixed  and  brought  up  to  an  admis- 
sible standard.  Low  grades  of  coffee  can  be  shipped 
forward  to  the  market  and  will  probably  reach  here  in 
quantity  so  that  there  might  be  a  considerable  volume  of 
cheap,  low-grade  stuff  that  might  find  sale  in  some  Asiatic 
market  and  the  business  might  just  as  well  be  done 
from  San  Francisco  as  from  some  European  port.  Goods 
that  might  become  damaged  by  heat  in  -  hold  could  be 
examined  and  if  their  condition  has  changed  so  that  they 
were  not  up  to  standard  desired  by  buyers  in  the  United 
States  the  duty  has  not  been  paid.  Goods  damaged  by 
salt  water  would  not  automatically  come  under  the  head 
of  condemnation  on  account  of  quality  under  Pure 
Food,  etc. 

(B)_ ASSORTING: 

Various  beans,  gums,  rices,  etc.,  would  afford  distinct 
opportunities  for  taking  advantage  of  the  market.  Goods 
that  reached  here  and  were  considered  not  up  to  basis 

Page      Forty-seven 


on  which  bought  could  be  held  in  the  free  port  and  part 
accepted  and  part  rejected.  It  would  not  be  necessary  to 
enter  the  entire  amount  covered  by  the  bill  of  lading. 

(C)— RE-PACKING: 

More  stocks  could  be  carried  and  be  much  more  flexi- 
ble. This  would  enable  dealers  to  quote  lower  prices  as 
they  would  have  a  quicker  turnover  and  not  such  high 
percentage  interest  per  unit,  or  dead  stock  with  a  pros- 
pect of  a  loss.  To  illustrate  our  ideas,  in  many  parts 
of  Spanish-America  some  goods  have  to  be  packed  for 
mule-back  transportation,  others  in  cases  of  a  weight  for 
llama  transportation,  and  others  in  cases  for  cart  trans- 
portation, etc.  The  currency  in  some  countries  demands 
a  package  that  can  be  sold  at  an  established  money  value 
which  is  current  there,  and  goods  are  desired  to  come 
already  in  such  packages,  as  matches,  etc.  Many  firms 
wish  their  own  labels,  and  this  matter  could  be  facilitated. 

(D)— STOCK  CARRYING: 

One  of  the  big  factors  in  this  heading  would  of  course 
be  the  carrying  of  larger  stocks  as  there  springs  up  a  big 
steamer  service.  This  is  not  guess-work,  it  is  a  state- 
ment of  fact  based  on  what  has  happened  in  every  other 
free  port.  Ships  that  go  periodically  from  Europe  clear 
through  to  some  destination  in  Asia  could  much  more 
readily  call  at  San  Francisco  and  discharge  their  cargoes. 
This  means  that  instead  of  Vladivostock,  or  Darien,  or 
Yokohama  having  a  direct  steamer  from  Europe  every  60 
days,  these  goods  could  be  brought  in  steamers  that  would 
much  more  readily  find  a  cargo  if  destined  to  San  Fran- 
cisco and  could  go  via  the  free  port  on  steamers  that 
would  run  continuously  between  here  and  the  ports  men- 
tioned. Merchants  would  rather  buy  from  San  Francisco, 
as  they  would  not  have  to  tie  up  so  much  money  in  the 
stock,  ordering  same  every  two  weeks  instead  of  ordering 
a  three  or  six  months  supply  at  a  time.  The  inaugura- 
tion of  such  routes  would  lead  to  other  commodities  being 
brought  in  and  markets  found  for  them,  which  helps  work 
up  a  trade  route. 

Page       Forty   -eight 


IT  IS  TRADE  ROUTES  THAT  WORK  UP  THE 
BIG  BUSINESS,  STEAMSHIP  OWNERS  KNOW 
WHAT  A  DEAD  LOSS  EMPTY  SPACE  IS  IN  THEIR 
HOLDS  AND  WOULD  MUCH  RATHER  KEEP 
THEIR  VESSELS  CONTINUOUSLY  RUNNING  IN 
AN  ESTABLISHED  TRADE  ROUTE  WITH  FULL 
CARGOES. 

In  this  connection  it  is  well  to  call  attention  to  a  funda- 
mental point  that  should  not  be  overlooked  and  that  is 
that  the  authorities  should  settle  on  a  few  ports  and  make 
a  drive  to  develop  them  big.  The  big  ports  in  the  world 
have  been  developed  by  hard  driving  and  concentration. 

(E)— FIRM  SALE  BASIS  FOR  TRANSACTIONS: 

This  is  of  fundamental  importance  and  cannot  be  over- 
estimated. Many  illustrations  that  probably  have  been 
given  by  ourselves  as  well  as  by  others  might  be  ex- 
plained at  the  moment  as  being  articles  that  have  not 
any  duty,  but  Congresses  are  continuously  changing,  and 
tariffs  in  the  light  of  past  history  are  likely  to  change 
again.  There  is  no  reason  why  distribution  to  oversea 
ports  should  at  all  be  interfered  with  by  tariff  considera- 
tion, which  has  only  to  do  with  the  consumption  of  goods 
in  the  country  itself.  A  .free  port  would  give  a  steady 
sale  basis  for  a  port  and  establish  it  on  a  firm  basis  as 
being  an  exchange  market  on  the  world's  highway  of 
traffic. 

3 — This  question  we  regard  as  being  more  applicable  to  those 
engaged  in  manufacture,  but  of  course  such  articles  as 
burlap  is  one  that  applies  to  every  firm. 

4 — We  regard  this  question  likewise  as  applying  principally 
to  manufacturers  and  might  call  attention  especially  to 
fertilizing  companies. 

5 — No  answer. 

6 — Any  merchant  today  has  daily  brought  to  his  attention 
the  opportunities  that  there  would  be  for  importation  and 
exportation  if  he  could  get  steamer  space.  Free  ports 
develop  trade  routes  and  attract  steamer  space.  As  far 

Pag-e      Forty  -nine 


as  aid  to  the  merchants  in  the  surrounding  country  there 
is  no  argument  necessary  to  explain  the  advantage  of 
being  situated  in  a  port  that  is  directly  connected  with 
the  different  producing  or  manufacturing  countries. 

7 — In  answering  this  question  it  is  necessary  to  consider  the 
institutions  that  are  in  all  lines  of  legitimate  activity,  or 
say,  producer,  banker,  manufacturer,  distributor,  consumer. 
The  producer  would  have  outlets  for  his  goods  estab- 
lished by  the  inauguration  of  steamer  routes  and  there- 
fore would  have  a  wider  field  of  marketing. 

The  banker  would  have  the  opportunity  of  financing 
many  different  lines  of  commodities  and  on  account  of 
better  transportation  facilities  would  probably  be  working 
in  a  market  that  would  furnish  a  great  deal  of  short-term 
paper,  as  well  as  have  their  field  of  opportunity  in  foreign 
exchange  greatly  enlarged.  A  number  of  commodities 
from  different  parts  of  the  world  generally  equalize  a 
demand  for  money,  so  that  same  can  be  kept  constantly 
employed  and  would  not  make  it  necessary  to  seek 
employment  through  the  stock  market's  demands.  This 
is  something  that  is  greatly  appreciated  in  Europe,  as 
produced  goods  are  real  wealth  and  must  necessarily  have 
real  value,  whereas  many  of  the  quotable  stocks  are  never 
considered  by  the  average  speculator  on  their  real  intrinsic 
value  but  simply  on  what  they  will  sell  for  as  against 
tightness  of  money,  etc.  We  believe  that  it  is  a  state- 
ment of  fact  that  articles  of  first  necessity  rarely  stay  for 
any  prolonged  time  below  the  cost  of  production,  and 
therefore  have  a  fundamental  value.  Stocks  can  go  to 
almost  any  figure  irrespective  of  what  their  face  values 
or  book  values  might  show. 

The  manufacturers  would  have  the  advantage  of  direct 
communication  with  the  source  of  supplies  and/or  in- 
creased distributing  outlet. 

Distributors : — In  the  established  markets  that  are  pre- 
eminently leaders  and  have  had  a  long  and  extensive 
training  practically  all  the  exporting  is  done  through 

Page      Fifty 


export  firms.  These  firms  are  almost  ranked  in  the  pro- 
fessional class  on  account  of  their  intimate  knowledge  of 
the  peoples,  countries,  trade  customs,  and  general  condi- 
tions of  the  foreign  countries  in  which  they  operate.  Such 
firms  are  already  established  in  San  Francisco  and  any 
manufacturer  of  any  commodity,  whether  he  was  located 
in  Denver,  Spokane,  Eureka  or  Sacramento  can  send  cuts 
and  data  to  these  different  houses,  who  would  gladly 
take  them  up  with  a  view  to  presenting  them  in  a  proper 
and  attractive  manner,  give  advice  as  to  writing  the  de- 
scription in  the  language  of  the  country  to  which  they 
are  addressed,  and  then  bring  them  before  the  proper 
channels  for  distribution.  The  hit  or  miss  system  employed 
at  present  by  every  little  manufacturer  endeavoring  to 
spend  a  lot  of  money  in  useless  advertising  and  sending 
out  circulars  in  the  wrong  language  to  irresponsible 
accounts  in  different  foreign  countries  is  simply  a  symp- 
tom of  nervous  energy  that  will  ultimately  dwindle  down 
to  the  proper  trade  distribution  as  explained  above,  and 
as  has  been  worked  out  in  London,  Hamburg,  etc.  At  a 
free  port  trained  houses  as  mentioned  above  will  continue 
to  be  represented  and  will  be  augmented  probably  by 
others. 

Consumer :  It  is  always  hard  to  tell  just  how  much  of 
any  benefit  will  reach  the  ultimate  consumer,  but  there  is 
no  denying  the  fact  that  direct  handling,  and  the  creation 
of  big  openings  of  marketing  opportunities  such  as  a  free 
port,  on  account  of  its  increased  operation  and  activities, 
permit  the  landing  and  marketing  of  goods  on  a  cheaper 
basis.  The  free  port  likewise  tends  to  do  away  with 
temporarily  high  prices  on  account  of  shortages  due  to 
lack  of  steamer  service. 

In  regard  to  the  advantages  of  San  Francisco  Bay,  these 
can  be  divided  into  wrhat  can  be  termed  Natural  and 
Artificial. 

NATURAL  ADVANTAGES 

It  is  one  of  the  finest  harbors  in  the  world,  with  plenty 
of  deep  water  and  area  for  dockage.  It  is  never  frozen 

Page       Fifty-one 


up  and  is  situated  in  a  climate  where  goods  keep  well  as 
regards  temperature  and  moisture.  When  one  realizes 
the  amount  of  tonnage  that  is  handled  at  say  Singapore, 
where  big  ships  have  to  lay  off,  or  in  Hongkong,  where 
there  is  a  great  amount  of  moisture  and  heat  at  different 
times  of  the  year,  and  handling  is  all  done  by  lighters, 
you  can  realize  what  a  natural  advantage  this  port  has. 
Kobe,  which  is  doing  a  tremendous  business  at  present, 
has  only  a  small  area  protected  by  a  breakwater,  and  it  is 
necessary  sometimes  for  steamers  to  lay  out  beyond  it  on 
account  of  no  space.  Steamers  are  attended  by  lighters. 
San  Francisco  is  likewise  located  in  a  position  that 
would  very  easily  supply  the  other  ports  on  the  north 
and  south  of  it,  such  as  Seattle,  Portland,  San  Pedro,  San 
Diego.  It  is  a  natural  place  to  break  cargo  and  distribute. 

ARTIFICIAL  ADVANTAGES 

As  regards  artificial  claims  for  San  Francisco,  we  be- 
lieve that  there  is  no  port  on  the  Pacific  that  contains 
as  many  merchants  that  have  gone  through  foreign  coun- 
tries and  done  so  much  work  to  establish  connections  and 
get  intimately  in  touch  with  the  conditions  of  such 
countries  and  the  requirements  of  their  trade  and  the 
personality  of  their  merchants.  San  Francisco's  trade  at 
the  present  time  is  almost  all  its  own  and  radiates  on 
account  of  the  activity  of  its  merchants.  In  a  word  the 
position  of  San  Francisco  can  best  be  understood  by 
anyone  that  is  at  all  familiar  with  foreign  trade  by  say- 
ing that  if  a  man  in  any  foreign  country  has  any  com- 
modity, whether  it  is  sugar,  or  coffee,  or  hemp  or  beans, 
or  anything  else,  he  wishes  to  know  what  the  market  is 
in  San  Francisco,  New  York,  London  and  Hamburg. 
This  is  due  to  connections  and  banking,  and  the  former 
took  a  great  deal  of  time  and  represents  a  great  deal  of 
effort. 

9— GENERAL  REMARKS: 

The  above  having  gone  into  detail  quite  extensively 
we  only  wish  to  add  that  one  of  the  great  factors  that 
hangs  over  100  per  cent  of  the  importers'  heads  is  gov- 

Page      Fifty  -two 


ernment  red  tape.  There  may  be  ways  of  handling  many 
things,  but  if  a  merchant  spent  the  time  to  study  them  up 
he  would  not  have  time  to  do  any  foreign  business.  The 
word,  "free"  port,  in  itself  is  a  call  to  freedom  of  exchange 
which  is  like  an  invitation  to  the  foreigner  to  trade,  as  he 
does  not  fear  Pure  Food  regulations,  under  valuation 
fines,  or  any  technical  local  laws  of  a  country,  and  the 
merchant  located  in  the  free  port  reciprocates  the  same 
feeling  in  the  same  way. 


Page      Fifty-three 


COMMITTEE  ON  FREE  PORT 

GEO.  A.  NEWHALL,  Chairman 

H.     M.     NEWHALL    &    CO. 

JNO.  H.  ROSSETER,  Vice-Chairman 

W.   R.    GRACE   &   CO. 

HON.  T.  S.  WILLIAMS 

BOARD    OF    HARBOR    COMMISSIONERS 

HON.  JNO.  H.  MC€ALLUM 

BOARD  OF    HARBOR   COMMISSIONERS 

HON.  RICHARD  J.  WELCH 

BOARD   OF    SUPERVISORS 

HON.  J.  J.  DWYER 

ATTORNEY 
C.    K.    MclNTOSH 
V.    P.,   BANK  OF   CALIFORNIA 

J.  R.  HANIFY 

J.    R.    HANIFY    &    CO. 

LARRY  W.  HARRIS 
AMES,  HARRIS,  NEVILLE  CO. 

JOHN  CLAUSEN 
V.  P.,  CROCKER  NATIONAL  BANK 

W.  H.  HAMMER 

PREST.  FOREIGN  TRADE  CLUB 

F.  F.  G.  HARPER 

CUSTOMS  BROKER 

C.  J.  SULLIVAN 

THRIFT,   INCORPORATED 

J.    H.    POLHEMUS 
HAMBERGER-POLHEMUS    CO. 

GARY  W.  COOK 

AMERICAN-HAWAIIAN    S.    S.    CO. 

E.    O.    McCORMICK 
SOUTHERN    PACIFIC    COMPANY 

W.  G.  BARNWELL 

A.    T.    &   S.    F.    RAILWAY 

H.    K.    FA  YE 
WESTERN     PACIFIC    RAILROAD 

Gov.  GEO.  C.  PARDEE 

OAKLAND 

J.  H.  KING 

PREST.    CHAMBER   OF   COMMERCE,   OAKLAND 

A.  W.  MALTBY 

CONCORD,    CONTRA    COSTA    CO. 

GEO.  S.  WALL 

RICHMOND    INDUSTRIAL    COMMISSION  C.    P.    CONVERSE 

RICHMOND,    CAL.  SECRETARY 

Page       Fifty  -four 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below, 
or  on  the  date  to  which  renewed.  Renewals  only: 

Tel.  No.  642-3405 

Renewals  may  be  made  4  days  prior  to  date  due. 
Renewed  books  are  subject  to  immediate  recall. 


LD21A-50m-2,'71 
(P2001slO)476— A-32 


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University  of  California 

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